Exam 3: Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Which of the following companies would you expect to report significant amounts of cash provided by financing activities?

Discuss operating,investing,and financing cash flows in relation to the various stages of the product life cycle.

Plano Corporation presented the following account balances for 2010 and 2009: Additional information: 1.Cash dividends of $20,000 were declared on December 15,2010,payable on January 15,2011. 2.The company issued 70,000 shares of $1 par value common stock during 2010. 3.The company repurchased 34,000 shares of its own common stock during the period.No treasury stock was sold during the period. 4.Additional equipment was purchased by issuing a $100,000 long-term note payable. Required: 1.Prepare the financing section of Plano's 2010 statement of cash flows. 2.Indicate if any of the events will be reported as a significant noncash transaction.

Normally,cash flows from investing activities will start providing cash during which phase of the product life cycle?

EBITDA not only ignores four expenses but also ignores changes in __________________________________________________ accounts.

An example of an item that is deducted from net income when preparing the operating activities section of the statement of cash using the indirect method is

Bankers Company reported net income of $40,000,which included depreciation expense and depletion expense of $21,000 and $18,000,respectively.The following changes also occurred during 2010:

Discuss the correlations that have been found between net income,net income plus or minus Type 1 adjustments (i.e.,adjustments to net income for revenues,expenses,gains,and losses that are recognized in income and are associated with changes in noncurrent assets,noncurrent liabilities,and shareholders' equity,but do not affect cash by the same amounts for the period),and cash flow from operations. A. Daley, "Evidence on the Relationships Between Earnings and Various Measures of Cash Flow," Accounting Review (October, 1986)revealed (1)a high correlation between net income and net income plus or minus Type 1 adjustments, and (2)a low correlation between net income and cash flow from operations, and (3)a low correlation between cash flow from operations and net income plus or minus Type 1 adjustments over time