The Purpose of the Cash Flow Statement Flashcards
1
Q
is net income an accrual-based number?
A
yes
net income takes into account payables and receivables
2
Q
___ is king?
A
cash
3
Q
why do firms go bankrupt?
A
because they run out of cash
4
Q
what is the primary purpose of the SOCF?
A
to understand a firm’s liquidity
e.g. cash flow from operating, investing and financing activities
5
Q
what does cfo, cfi and cff stand for?
A
cash flow from operating, investing & financing activities
6
Q
if cfo = (275,000), cfi = 0 and cff = 300,000
what is the net increase in cash?
A
25,000
300,000 - 0 - 275,000 = 25,000
7
Q
what are the two ways a firm could raise financing?
A
through issuance of stocks (equity financing)
or through issuing a note payable - bank loan (debt financing)
8
Q
A
