Accounting ORION Ch 12

Identify the type of activity that includes lending money and collecting on the loans?
Investing activities
Financing activities
Operating activities
Noncash investing and financing activities

Investing activities
Which of the following is associated with financing activities?
Issuing debt
Acquiring investments
Acquiring long-lived assets
Lending money

Issuing debt
In general, which of the following is considered the MOST important category on the statement of cash flows?
Cash flows from investing activities
Cash flows from operating activities
Cash flows from financing activities
Cash flows from significant noncash activities

Cash flows from operating activities
On the statement of cash flows, how are cash receipts from interest and dividends classified?
As significant noncash activities
As financing activities
As investing activities
As operating activities

As operating activities
W
Where is a conversion of bonds into common stock reported on a statement of cash flows?
In the stockholder’s equity section
In the significant noncash activities
In the financing section
In the extraordinary section

In the significant noncash activities
An example of a noncash transaction that is not reported in The body of a statement of cash flows is
Delivering payment of equipment
obtaining capital from owners
Repaying previously borrowed money
Acquiring land by issuing common stock

Acquiring land by issuing common stock
What can be determined by converting net income from an accrual basis to a cash basis under either the direct or indirect method?
Operating expenses
Net cash provided by goods sold
Gross sales revenue
Net cash provided by operating activities

Net cash provided by operating activities
What is the result of an increase in account payable during a period?
Expenses on an accrual basis are less than expenses on a cash basis
Revenue on an accrual basis are less than revenues on a cash basis
Expenses on a accrual basis are the same as expenses on a cash basis
Expenses on an accrual basis are greater than expenses on a cash basis

Expenses on an accrual basis are greater than expenses on a cash basis
________ causes a change in cash during a period.
Accrual of an expense
Recording depreciation expense
Payment of accounts payable
Declaration of cash dividend

Payment of accounts payable
The ________ method adjusts net income to find net cash provided by operating activities.
Indirect
Working capital
Cost-benefit
Direct

Indirect
Which component of net income does not affect cash flow?
Depreciation on plant assets
Payment of cash dividends
Issuance of notes payable
Purchase of inventory

Depreciation on plant assets
If a company uses the indirect method to depict cash flows, where, if at all, would accounts receivable collected be classified on the statement of cash flows?
Financing activities section
Noncash activities
Operating activities section
Investing activities section

Operating activities section
_______ causes a change in cash during a period.
Write off of an uncollectible account receivable
Recording depreciation expense
Payment of an account payable
Declaration of a dividend

Payment of an account receivable
Which of the following describes free cash flow?
Cash provided by operations less capital expenditures and cash dividends
Cash provided by investing activities less capital expenditures
Cash provided by investing activities less capital expenditures and cash dividends
Cash provided by operations less cash dividends

Cash provided by operations less capital expenditures and cash dividends
Which of the following describes cash provided by operations less capital expenditures and cash dividends?
Free cash flow
Direct cash flow
Indirect cash flow
Adjusted cash flow

Free cash flow
Which of the following statements about free cash flow is true?
Free cash flow is most commonly calculated by subtracting capital expenditures from cash provided by operations and then adding cash dividends.
Free cash flow is not reported on the statement of cash flows.
Significant free cash flow indicates less potential to finance new investments.
Significant free cash flow indicates less potential to pay additional dividends.

Free cash flow is not reported on the statement of cash flows
Jacob is assessing the corporate life cycle of two companies. He notices that Monaco Enterprises is purchasing many long-term assets and that Resendez Industries is selling many long-term assets. What should Jacob conclude about these two companies?
Monaco Enterprises is in the maturity phase, whereas Resendez Industries is in the growth phase.
Monaco Enterprises is in the introductory phase, whereas Resendez Industries is in the decline phase.
Monaco Enterprises is in the decline phase, whereas Resendez Industries is in the maturity phase.
Monaco Enterprises is in the growth phase, whereas Resendez Industries is in the introductory phase.

Monaco Enterprises is in the introductory phase, whereas Resendez Industries is in the decline phase.
When looking at the financial statements, you notice that a company has cash flows from operating and investing activities that are significantly lower than their cash flows from financing activities. What can you assume about the company?
They are likely in either the maturity phase or the decline phase of the corporate life cycle.
They are likely in either the introductory phase or growth phase of the corporate life cycle.
They are likely in either the introductory phase or the maturity phase of the corporate life cycle.
They are likely in either the growth phase or the maturity phase of the corporate life cycle.

They are likely in either the introductory phase or growth phase of the corporate life cycle
Jose is analyzing the financial statements of two companies. The first company has a net income that is significantly higher than their cash flows provided by operating activities, whereas the second company has net income and cash flows provided by operating activities that are very similar. What can Jose assume about these two companies?
The first company is in the introductory phase of the corporate life cycle, whereas the second company is in the growth phase of the corporate life cycle.
The first company is in the decline phase of the corporate life cycle, whereas the second company is in the growth phase of the corporate life cycle.
The first company is in the maturity phase of the corporate life cycle, whereas the second company is in the decline phase of the corporate life cycle.
The first company is in the growth phase of the corporate life cycle, whereas the second company is in the maturity phase of the corporate life cycle.

The first company is in the growth phase of the corporate life cycle, whereas the second company is in the maturity phase of the corporate life cycle.
Michelle is investigating the financial statements of two companies. One company is in the maturity phase of the corporate life cycle, and the other company is in the decline phase. What financial activity might both companies be involved in?
Taking out new loans
Issuing bonds
Purchasing treasury stock
Issuing common stock

Purchasing treasury stock
What effect will a decrease in inventory have on free cash flow?
It will stabilize free cash flows
It will have no effect on free cash flows
It will increase cash flows
It will decrease cash flows

It will increase cash flows
Which of the following companies has the HIGHEST free cash flow?
A company has $790,000 cash provided by operating activities, $137,000 in capital expenditures, and $63,000 in dividends paid.
A company has $520,000 cash provided by operating activities, $85,000 in capital expenditures, and $22,000 in dividends paid.
A company has $600,000 cash provided by operating activities, $96,000 in capital expenditures, and $42,000 in dividends paid.
A company has $650,000 cash provided by operating activities, $109,000 in capital expenditures, and $74,000 in dividends paid.

A company has $790,000 cash provided by operating activities, $137,000 in capital expenditures, and $63,000 in dividends paid.
Which of the following companies paid the MOST in cash dividends during the year?
A company with $623,000 in free cash flows, $812,000 in net cash provided by operating activities, and $64,000 in capital expenditures
A company with $642,000 in free cash flows, $963,000 in net cash provided by operating activities, and $175,000 in capital expenditures
A company with $546,000 in free cash flows, $894,000 in net cash provided by operating activities, and $153,000 in capital expenditures
A company with $593,000 in free cash flows, $728,000 in net cash provided by operating activities, and $75,000 in capital expenditures

A company with $546,000 in free cash flows, $894,000 in net cash provided by operating activities, and $153,000 in capital expenditures
Which of the following companies is most likely in the introductory phase?
A company with positive cash flows from operating activities, positive cash flows from capital expenditures, and negative cash flows from dividends
A company with negative cash flows from operating activities and zero cash flows from capital expenditures and dividends
A company with positive cash flows from operating activities, negative cash flows from capital expenditures, and negative cash flows from dividends
A company with negative cash flows from operating activities, negative cash flows from capital expenditures, and zero cash flows from dividends

A company with negative cash flows from operating activities, negative cash flows from capital expenditures, and zero cash flows from dividends