Analysis Intermediate: Understanding the Statement of Cash Flow

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1.
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.
2.
The statement of cash flow is divided into three sections. Which of the following is not one of those sections?
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Cash flows from common stock issued. Common stocks do not have their own section.
3.
Creditors use statements of cash flow to keep track of their borrowers abilities to repay loans.
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True. These statements keep them informed about where their borrowers money is going.
4.
On a companys statement of cash flow, the sale of property is recorded as a ______.
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Cash inflow. It generates incoming cash.
5.
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.
6.
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.