1.
The primary purpose of the cash flow statement is to provide information about the cash receipts and cash payments of an entity during a period.
A.
True
B.
False
2.
The receipt of investment revenue (interest and dividends) is classified as an investing activity.
A.
True
B.
False
3.
The indirect method adjusts net income for items that affected reported accrual-based net income but did not affect cash.
A.
True
B.
False
4.
Under the direct method, cash receipts from customers equals revenues from sales plus an increase in accounts receivable.
A.
True
B.
False
5.
One way to calculate the cash flow per share ratio is to divide cash flow from operating, investing and financing activities by the number of common shares.
A.
True
B.
False
6.
The cash flow statement reports all of the following except the:
A.
cash receipts during a period.
B.
cash payments during a period.
C.
net change in cash during a period.
D.
all of these options are reported.
7.
Cash equivalents are short-term, highly liquid investments that are:
A.
readily convertible to known amounts of cash.
B.
relatively insensitive to changes in interest rates.
C.
readily convertible to known amounts of cash and relatively insensitive to changes in interest rates.
D.
within one year of maturity.
8.
Cash flow activities that include acquiring and disposing of investments, productive long-lived assets, and loans are classified as:
A.
operating activities.
B.
investing activities.
C.
financing activities.
D.
noncash activities.
9.
Cash flow activities that include obtaining cash from issuing debt and repaying the amounts borrowed are classified as:
A.
operating activities.
B.
investing activities.
C.
financing activities.
D.
noncash activities.
10.
Operating activities include cash outflows to:
A.
purchase property and equipment.
B.
purchase debt or equity securities.
C.
make loans to other entities.
D.
suppliers for inventory.
11.
The cash flow statement provides useful information by showing the:
A.
entity's ability to generate future cash flows.
B.
entity's ability to pay dividends and meet obligations..
C.
reasons for the difference between net income and cash provided (used) by operating activities.
D.
all of these options.
12.
The information needed to prepare the cash flow statement includes all of the following except:
A.
comparative balance sheet.
B.
retained earnings statement.
C.
additional information.
D.
current income statement.
13.
The operating activities section of the cash flow statement must be converted from an accrual basis to a cash basis under:
A.
the direct method only.
B.
the indirect method only.
C.
both the direct and indirect methods.
D.
neither method.
14.
All of the following would be added to net income under the indirect method except:
A.
amortization expense.
B.
increase in accounts payable.
C.
loss on sale of equipment.
D.
increase in prepaid expenses.
15.
Which of the following would be deducted from net income under the indirect method?
A.
Amortization Expense.
B.
Loss on sale of asset.
C.
Decrease in accrued expenses payable.
D.
Decrease in accounts receivable.
16.
Under the direct method, cash payments for operating expenses are a (an):
A.
operating activity.
B.
investing activity.
C.
financing activity.
D.
noncash activity.
17.
Under the direct method, cash payments to suppliers equals cost of goods sold:
A.
plus an increase in inventory and accounts payable.
B.
minus a decrease in inventory and accounts payable.
C.
minus an increase in inventory and plus a decrease in accounts payable.
D.
plus an increase in inventory and minus an increase in accounts payable.
18.
Under the direct method, cash payments for operating expenses equals operating expenses:
A.
plus an increase in prepaid expenses and accrued expenses payable.
B.
minus a decrease in prepaid expenses and accrued expenses payable.
C.
minus a decrease in prepaid expenses and plus a decrease in accrued expenses payable.
D.
plus a decrease in prepaid expenses and minus an increase in accrued expenses payable.
19.
The cash current debt coverage ratio is calculated by dividing:
A.
net increase in cash by average current liabilities.
B.
net cash from financing activities by average current liabilities.
C.
net cash from operating activities by average current liabilities.
D.
average current liabilities by net cash from operating activities.
20.
The cash-based counterpart to the profit margin ratio is the:
A.
cash current debt coverage.
B.
cash flow per share.
C.
cash return on sales.
D.
cash total debt coverage.
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