Analysis Intermediate: Understanding the Statement of Cash Flow

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
A firms production and sales cash flows are recorded in the _______ section of the statement of cash flow.
Choose wisely. There is only one correct answer.
Operating. The operating section includes inflows and outflows of money related to production and sales.
2.
Why is the statement of cash flow important to investors?
Choose wisely. There is only one correct answer.
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.
3.
Why is depreciation added to net income when calculating a firms cash flow from operating activities?
Choose wisely. There is only one correct answer.
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.
4.
The statement of cash flow is divided into three sections. Which of the following is not one of those sections?
Choose wisely. There is only one correct answer.
Cash flows from common stock issued. Common stocks do not have their own section.
5.
The ABC Company has just bought 1 million shares of the XYZ Company. It will record this purchase as a cash outflow.
Choose wisely. There is only one correct answer.
True. Because money left ABC to pay for the securities, the purchase is a cash outflow.
6.
An income statement records only cash received.
Choose wisely. There is only one correct answer.
False. It records revenue even when the revenue has not been received.