Question 1

Academic research has found that market rates of return on common stock are the most highly correlated with:

Accepted Answer

A)  net income. 
B)  cash flow from operations. 
C)  EBITDA. 
D)  cash flow from investing activities. 
A)  net income. 
B)  cash flow from operations. 
C)  EBITDA. 
D)  cash flow from investing activities. A

Question 2

Free cash flows to all debt and common equity shareholders represents the excess of cash flows from:

Accepted Answer

A)  operating activities over cash flows for financing activities 
B)  investing over cash flows for operating activities 
C)  investing over cash flows for financing activities 
D)  operating activities over cash flows for investing activities 
A)  operating activities over cash flows for financing activities 
B)  investing over cash flows for operating activities 
C)  investing over cash flows for financing activities 
D)  operating activities over cash flows for investing activities D

Question 3

Cash flow from operations should include none of the cash flows associated with marketable securities if such transactions are viewed as ___________________________________.

Accepted Answer

investing activities

Question 4

Under the ______________________________ of preparing the statement of cash flow's operating activities section firms list the cash flows from selling goods and services and then subtract the cash outflows to providers of goods and services.

Accepted Answer

The answer of Under the ______________________________ of preparing the statement...

Question 5

Which of the following is a cash flow from operating activities?

Accepted Answer

A)  Sale of long-term investments in common stock. 
B)  Purchase of merchandise for resale. 
C)  Payment of a note payable. 
D)  Sale of a piece of land no longer used in operations. 
A)  Sale of long-term investments in common stock. 
B)  Purchase of merchandise for resale. 
C)  Payment of a note payable. 
D)  Sale of a piece of land no longer used in operations.

Question 6

When preparing the statement of cash flows using the indirect method,the sale of marketable securities would appear as:

Accepted Answer

A)  a use of cash in the investing activities section 
B)  a source of cash in the investing activities section 
C)  a use of cash in the financing activities section 
D)  a source of cash in the financing activities section 
A)  a use of cash in the investing activities section 
B)  a source of cash in the investing activities section 
C)  a use of cash in the financing activities section 
D)  a source of cash in the financing activities section

Question 7

Which of the following transactions would not create a cash flow?

Accepted Answer

A)  Payment of a cash dividend. 
B)  The company purchased some of its own stock from a stockholder. 
C)  Amortization of patent for the period. 
D)  Sale of equipment at book value (i.e.no gain or loss). 
A)  Payment of a cash dividend. 
B)  The company purchased some of its own stock from a stockholder. 
C)  Amortization of patent for the period. 
D)  Sale of equipment at book value (i.e.no gain or loss).

Question 8

Cilca Corporation is a supplier to the pulp and paper industry.Selected financial information about Cilca is listed below:
• Purchased real estate for $440,000 in cash.The cash was borrowed from a bank.
• Sold investments for $400,000.
• Paid dividends of $480,000.
• Issued shares of common stock for $200,000.
• Purchased machinery and equipment for $100,000 cash.
• Paid $360,000 on a bank loan.
• Reduced accounts receivable by $80,000.
• Increased accounts payable $160,000.
Sales for the period were $450,000
Use the above information to calculate Cilca's:
a.cash used or provided by operating activities
b.cash used or provided by financing activities

Accepted Answer

a.
cash used or provided by operating ac

Question 9

In a statement of cash flows,interest received from sources other than a company's investments would be classified as cash inflows from:

Accepted Answer

A)  lending activities. 
B)  operating activities. 
C)  investing activities. 
D)  financing activities. 
A)  lending activities. 
B)  operating activities. 
C)  investing activities. 
D)  financing activities.

Question 10

For the following types of companies,discuss whether you think their cash flows from operations,investing,and financing will be positive (the activity provides cash)or negative (the activity uses cash).Provide support for your answer.
1.Tech Corporation is a developer of computer software for the gaming industry.The company recently launched its first software title.The company is expanding its operations by hiring additional developers and administrative staff.The company is not yet profitable,but expects to break even within two years.Investors view it as having a first mover advantage and have been happy to invest in the company.
2.Midwest Corporation is a supplier to the agricultural industry.The company is experiencing its 25th year of profitability,but is concerned that sales have contracted for the fifth year in a row.Midwest prides itself in paying dividends and having no debt on its balance sheet.
3.Semi Inc.manufactures semiconductors.The company has just introduced its ninth new product and is the leader in market share for the industry.The company continues to invest in research and development and expand by purchasing competitors.The company has yet to pay dividends,but is considering it in the future.The company's largest current asset is cash,due to its high profit margin.

Accepted Answer

1.This company is in the introduction ph

Question 11

Firms with short operating cycles will experience less of a lag between the creation and delivery of their products and the collection of cash from customers because:

Accepted Answer

A)  their cash flow from operations will be much greater than their working capital from operations. 
B)  their cash flow from operations will not differ much from their working capital from operations. 
C)  their cash flow from operations will be much less than their working capital from operations. 
D)  there will be no relation between their cash flow from operations and working capital from operations. 
A)  their cash flow from operations will be much greater than their working capital from operations. 
B)  their cash flow from operations will not differ much from their working capital from operations. 
C)  their cash flow from operations will be much less than their working capital from operations. 
D)  there will be no relation between their cash flow from operations and working capital from operations.

Question 12

As products move through the maturity phase,companies invest to ___________ productive capacity.

Accepted Answer

A)  increase 
B)  decrease 
C)  maintain 
D)  Not enough information to answer this question. 
A)  increase 
B)  decrease 
C)  maintain 
D)  Not enough information to answer this question.

Question 13

Jarrett Company,home improvement retailer,reported cost of goods sold of $33,729 million for the fiscal year ended January 30,2010.It reported merchandise inventories of $9,611 million at the beginning of fiscal 2010 and $10,209 million at the end of fiscal 2010.It reported
accounts payable to suppliers of $5,713 million at the beginning of fiscal 2010 and $6,109
million at the end of fiscal 2010.Compute the amount of cash paid to merchandise suppliers
during fiscal 2010.

Accepted Answer

(amounts i

Question 14

Selected financial statement information for Filmco appears below:
 $$\begin{array} { l r r } 
\underline{\text { Balance Sheet accaunts }} &\underline{ \text { Jan.1,2010 }} &\underline{ \text { Dec. 31, 2010 }} \\
\text { Inventary } & \$ 210,000 &\$90,000 \
\text { Accounts Receivable } & \$ 85,000 & \$ 45,000
\end{array}$$ 
 $\underline{\text { Income Statement (partial)} } \quad \underline{\text { For the year ended Dec. 31, } 2010}$

$\begin{array}{ll}

\text { Sales } &&& \$ 900,000 \
\text { Cost of Goods Sold }&& & \underline{\$ 730,000} \
\text { Gross Profit } & &&\$ 170,000
\end{array}$
 
Calculate the amount of cash collected from customers and the amount of cash spent on inventory for 2010 by Filmco.

Accepted Answer

Cash collected from customers:

Question 15

The receipt of cash when employees exercise stock options is a(n)____________________ activity.

Accepted Answer

The answer of The receipt of cash when employees exercise...

Question 16

One rationale for the statement of cash flows is to:

Accepted Answer

A)  ensure that the cash account balances at year-end. 
B)  reconcile differences between net income and cash receipts and disbursements. 
C)  calculate the company's free cash flow. 
D)  examine the cash effects of income from discontinued operations, extraordinary items and changes in accounting principles. 
A)  ensure that the cash account balances at year-end. 
B)  reconcile differences between net income and cash receipts and disbursements. 
C)  calculate the company's free cash flow. 
D)  examine the cash effects of income from discontinued operations, extraordinary items and changes in accounting principles.

Question 17

Cash collected from customers would appear in the operating activities section of a statement of cash flows prepared using the ____________________ method

Accepted Answer

The answer of Cash collected from customers would appear in...

Question 18

Which of the following is the correct formula for calculating cash collections from customers?

Accepted Answer

A)  sales for the period plus accounts receivable at the beginning of the period 
B)  sales for the period plus accounts receivable at the beginning of the period minus accounts receivable at the end of the period 
C)  sales for the period plus accounts receivable at the end of the period 
D)  sales for the period plus accounts receivable at the end of the period minus accounts receivable at the beginning of the period 
A)  sales for the period plus accounts receivable at the beginning of the period 
B)  sales for the period plus accounts receivable at the beginning of the period minus accounts receivable at the end of the period 
C)  sales for the period plus accounts receivable at the end of the period 
D)  sales for the period plus accounts receivable at the end of the period minus accounts receivable at the beginning of the period

Question 19

When net income is high relative to operating cash flows,we describe the firm as having recorded:

Accepted Answer

A)  income-decreasing accruals. 
B)  income-increasing accruals. 
C)  income-neutral accruals. 
D)  abnormal accruals. 
A)  income-decreasing accruals. 
B)  income-increasing accruals. 
C)  income-neutral accruals. 
D)  abnormal accruals.

Question 20

____________________ activities relate to the normal operations of the firm,selling goods and providing services.

Accepted Answer

The answer of ____________________ activities relate to the normal operations...

Academic research has found that market rates of return on common stock are the most highly correlated with:

Free cash flows to all debt and common equity shareholders represents the excess of cash flows from:

Cash flow from operations should include none of the cash flows associated with marketable securities if such transactions are viewed as ___________________________________.

Under the ______________________________ of preparing the statement of cash flow's operating activities section firms list the cash flows from selling goods and services and then subtract the cash outflows to providers of goods and services.

Which of the following is a cash flow from operating activities?

When preparing the statement of cash flows using the indirect method,the sale of marketable securities would appear as:

Which of the following transactions would not create a cash flow?

In a statement of cash flows,interest received from sources other than a company's investments would be classified as cash inflows from:

Firms with short operating cycles will experience less of a lag between the creation and delivery of their products and the collection of cash from customers because:

As products move through the maturity phase,companies invest to ___________ productive capacity.

The receipt of cash when employees exercise stock options is a(n)____________________ activity.

One rationale for the statement of cash flows is to:

Cash collected from customers would appear in the operating activities section of a statement of cash flows prepared using the ____________________ method

Which of the following is the correct formula for calculating cash collections from customers?

When net income is high relative to operating cash flows,we describe the firm as having recorded:

____________________ activities relate to the normal operations of the firm,selling goods and providing services.

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Asset and Liability Valuation and Income Recognition

Profitability Analysis

Risk Analysis

Accounting Quality

Financing Activities

Investing Activities

Operating Activities

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

Filters

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

Academic research has found that market rates of return on common stock are the most highly correlated with:

Free cash flows to all debt and common equity shareholders represents the excess of cash flows from:

Cash flow from operations should include none of the cash flows associated with marketable securities if such transactions are viewed as ___________________________________.

Under the ______________________________ of preparing the statement of cash flow's operating activities section firms list the cash flows from selling goods and services and then subtract the cash outflows to providers of goods and services.

Which of the following is a cash flow from operating activities?

When preparing the statement of cash flows using the indirect method,the sale of marketable securities would appear as:

Which of the following transactions would not create a cash flow?

In a statement of cash flows,interest received from sources other than a company's investments would be classified as cash inflows from:

Firms with short operating cycles will experience less of a lag between the creation and delivery of their products and the collection of cash from customers because:

As products move through the maturity phase,companies invest to ___________ productive capacity.

The receipt of cash when employees exercise stock options is a(n)____________________ activity.

One rationale for the statement of cash flows is to:

Cash collected from customers would appear in the operating activities section of a statement of cash flows prepared using the ____________________ method

Which of the following is the correct formula for calculating cash collections from customers?

When net income is high relative to operating cash flows,we describe the firm as having recorded:

____________________ activities relate to the normal operations of the firm,selling goods and providing services.

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Asset and Liability Valuation and Income Recognition

Profitability Analysis

Risk Analysis

Accounting Quality

Financing Activities

Investing Activities

Operating Activities

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

Filters