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Stocks 303: Understanding the Statement of Cash Flow

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1.
Why is depreciation added to net income when calculating a firms cash flow from operating activities?
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Cash is not paid out for it. Because the statement of cash flow records inflows and outflows of cash, depreciation must be added to net income, since it cannot be subtracted from it.
2.
Which of the following is not included in the statement of cash flow?
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Managing activities. The statement of cash flow does not include this.
3.
A firms production and sales cash flows are recorded in the _______ section of the statement of cash flow.
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Operating. The operating section includes inflows and outflows of money related to production and sales.
4.
In which part of the statement of cash flow would you find debt issues recorded?
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Cash flows from financing activities. Debts are listed in this section.
5.
An income statement records only cash received.
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False. It records revenue even when the revenue has not been received.
6.
The investing activities section of the statement of cash flow records the buying of machinery.
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True. Buying equipment is considered an investment activity by a corporation.