Question 1

What is working capital from operations? Discuss what types of firms will have similar net income and working capital from operations? For which types of firms will net income and working capital from operations be significantly different?

Accepted Answer

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Question 2

The calculation of cash flow from operations under the indirect method involves two types of adjustments.Discuss each type of adjustment and provide an example of each type of adjustment.

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The answer of The calculation of cash flow from operations...

Question 3

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.

Question 4

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.

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Question 5

The period in which a firm commences the manufacture of its product to the time it receives cash is called the ______________________________.

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Question 6

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.

Question 7

Which of the following is an approximation of a cash-based measure of pretax operating earnings?

Accepted Answer

A)  Net sales less income taxes 
B)  EBITDA 
C)  Net income 
D)  Gross profit

Question 8

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

The answer of Jarrett Company,home improvement retailer,reported cost of goods...

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