Analysis Intermediate: Understanding the Statement of Cash Flow

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1.
Why is the statement of cash flow important to investors?
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It helps investors determine the financial well-being of companies. The statement of cash flow does not make recommendations, nor can it provide actual data on the future.
2.
The statement of cash flow records inflows and outflows of cash as soon as income is earned or expenses incurred.
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False. It records income and expenses regardless of when they were earned or incurred.
3.
The operating activities section of the statement of cash flow covers cash flows associated with _______.
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Production and sales. It concerns itself with the cash flows of making and selling the companys products or services.
4.
In a statement of cash flow, accounts receivable are listed in the section on cash flows from operating activities.
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True. Accounts receivable are operating activities.
5.
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.
6.
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.