cash flows quiz 2 pt2

Question 1

A primary advantage of the indirect method is that it ….

In doing so, it shows how net income is related to the ending cash balance that is reported on the balance sheet.

Answer 1

reconciles the differences between net income and net cash flows from operations.

Question 2

Cash flows from financing activities show the cash inflows and outflows related to changes in a company’s long-term…..

Answer 2

liabilities and stockholders’ equity

Question 3

Cash _____ from financing activities normally arise from ISSUING long-term debt or equity securities.

Cash ______ from financing activities include PAYING cash dividends, repaying long-term debt, and acquiring treasury stock.

Answer 3

inflows

outflows

Question 4

A company may enter into transactions involving investing and financing activities that do NOT DIRECTLY affect cash.

Although this transaction does not directly affect cash, it does eliminate future cash payments for interest and for paying the bonds when they mature.

Because such transactions indirectly affect cash flows, they are reported in a ____________.

Answer 4

separate section of the statement of cash flows.

(This section usually appears at the bottom of the statement of cash flows.)

Question 5

The indirect method of reporting cash flows from operating activities uses the log that a change in any balance sheet account (including cash) can be analyzed in terms of changes in the other balance sheet accounts.

Thus, by analyzing changes in noncash balance sheet accounts, any change in the cash account can be ________-

Answer 5

indirectly determined.

Question 6

any change in the cash account can be determined by analyzing changes in the liability, stockholders’ equity, and noncash asset accounts .

Answer 6

Change in Cash =
Change in Liabilities + Change in Stockholders’ Equity - Change in Noncash Assets

Question 7

Since net income (or net loss) is a component any change in ___________, the first account normally analyzed is ______________

Answer 7

Retained Earnings

Question 8

because net income is determined using the __________ of accounting.

Under the ___________ of accounting, revenues and expenses are recorded at different times from when cash is received or paid.

Answer 8

accrual method