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Cash Flows Statement Flashcards

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1
Q

What is the primary purpose of a Cash Flows Statement?

A

To provide information about the cash inflows and outflows of a company during a specific period.

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2
Q

True or False: The Cash Flows Statement is part of a company’s financial statements.

A

True

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3
Q

What are the three main sections of a Cash Flows Statement?

A

Operating activities, investing activities, and financing activities.

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4
Q

Fill in the blank: Cash flows from _____ activities include cash transactions from the core business operations.

A

operating

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5
Q

What does cash flow from investing activities typically include?

A

Cash transactions for the purchase and sale of physical and financial investments.

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6
Q

True or False: Financing activities involve cash flows related to obtaining and repaying capital.

A

True

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7
Q

What is the difference between direct and indirect methods for reporting cash flows from operating activities?

A

The direct method lists all cash receipts and payments, while the indirect method adjusts net income for changes in non-cash items.

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8
Q

Which method is generally preferred by financial analysts for the Cash Flow Statement?

A

The indirect method.

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9
Q

What does a positive cash flow indicate?

A

That a company has more cash coming in than going out.

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10
Q

What is the equation for calculating cash flow?

A

Cash flow = Cash inflows - Cash outflows.

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11
Q

Fill in the blank: Depreciation is added back to net income in the _____ method.

A

indirect

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12
Q

What type of cash flow includes payments to suppliers and cash receipts from customers?

A

Operating cash flow.

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13
Q

True or False: Cash flows from financing activities can include dividends paid.

A

True

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14
Q

What is the significance of free cash flow?

A

It measures a company’s ability to generate cash after accounting for capital expenditures.

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15
Q

What does the term ‘working capital’ refer to?

A

The difference between current assets and current liabilities.

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16
Q

Fill in the blank: Cash flow from _____ activities includes cash received from issuing stocks.

A

financing

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17
Q

What is the impact of a negative cash flow?

A

It may indicate financial trouble or that a company is investing heavily in growth.

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18
Q

Which financial statement provides a snapshot of a company’s financial position at a specific point in time?

A

Balance Sheet.

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19
Q

True or False: Cash Flows Statement and Income Statement are the same.

A

False

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20
Q

What type of cash flow includes cash spent on purchasing new equipment?

A

Investing cash flow.

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21
Q

What does a cash flow forecast help a company do?

A

Estimate future cash inflows and outflows.

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22
Q

Fill in the blank: Cash flows from _____ activities can include loans received and repayments of debt.

A

financing

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23
Q

What is a cash flow statement’s effect on decision-making?

A

It helps stakeholders assess liquidity and financial flexibility.

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24
Q

What is the term for cash generated from operations after adjusting for changes in working capital?

A

Net cash provided by operating activities.

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25
True or False: Non-cash transactions are included in the Cash Flow Statement.
False
26
What does 'cash equivalents' refer to?
Short-term investments that are easily convertible into cash.
27
Fill in the blank: A cash flow statement is typically prepared for _____ periods.
quarterly or annual
28
What is the role of the operating cash flow ratio?
To measure a company's ability to cover its short-term liabilities with cash generated from operations.
29
What financial metric can be derived from the Cash Flow Statement to assess profitability?
Operating cash flow margin.
30
Fill in the blank: An increase in accounts payable would _____ cash flow from operating activities.
increase
31
What is a common use of cash flow analysis?
To evaluate a company's financial health and operational efficiency.
32
True or False: The Cash Flows Statement does not affect a company's stock price.
False
33
What is the purpose of reconciling net income to net cash provided by operating activities?
To adjust net income for non-cash items and changes in working capital.
34
Fill in the blank: Cash flows from _____ activities include cash paid for dividends.
financing
35
What does a cash flow statement reveal about a company's liquidity?
It shows the ability to meet short-term obligations with available cash.
36
What is the formula to calculate free cash flow?
Free cash flow = Operating cash flow - Capital expenditures.
37
What is the primary purpose of a cash flow statement?
To provide information about the cash inflows and outflows of a company during a specific period.
38
True or False: Cash flow statements are required by Generally Accepted Accounting Principles (GAAP).
True
39
What are the three main sections of a cash flow statement?
Operating activities, investing activities, and financing activities.
40
Fill in the blank: Cash flows from __________ activities include cash transactions from the company’s core business operations.
operating
41
What type of cash flows would include the purchase of equipment?
Investing activities
42
True or False: Financing activities in a cash flow statement include issuing stock and borrowing money.
True
43
What is the indirect method of preparing a cash flow statement?
A method that starts with net income and adjusts for non-cash transactions and changes in working capital.
44
What is the direct method of preparing a cash flow statement?
A method that lists cash receipts and cash payments during the reporting period.
45
Multiple Choice: Which of the following is NOT included in cash flows from operating activities? A) Cash received from customers B) Cash paid to suppliers C) Cash paid for dividends D) Cash paid for salaries
C) Cash paid for dividends
46
What does a positive cash flow indicate?
That a company has more cash inflows than outflows during a specific period.
47
Fill in the blank: Cash flows from __________ activities include transactions related to the company's capital structure.
financing
48
True or False: Depreciation is a cash expense that affects cash flow.
False
49
What is the significance of cash flow from operating activities?
It indicates the ability of the company to generate sufficient cash from its core business operations.
50
What does it mean if a company has negative cash flow from investing activities?
It may indicate that the company is investing in growth opportunities.
51
Multiple Choice: Which of the following would be considered a cash inflow in financing activities? A) Repayment of a loan B) Issuance of stock C) Purchase of treasury stock D) Payment of dividends
B) Issuance of stock
52
What is the cash flow statement also known as?
Statement of cash flows
53
Fill in the blank: The cash flow statement reconciles the __________ balance with the cash balance.
net income
54
True or False: Cash flow statements can help assess a company’s liquidity and solvency.
True
55
What does it mean if a company experiences a cash flow crisis?
It means the company does not have enough cash to meet its obligations.
56
What is one limitation of the cash flow statement?
It does not provide a complete picture of a company's financial performance or position.
57
Multiple Choice: Which of the following is considered a cash equivalent? A) Accounts receivable B) Inventory C) Treasury bills D) Long-term investments
C) Treasury bills
58
What is the impact of issuing new debt on the cash flow statement?
It results in a cash inflow in the financing activities section.
59
Fill in the blank: Cash flows from __________ activities might include the sale of property, plant, and equipment.
investing
60
True or False: The cash flow statement is prepared using accrual accounting principles.
False
61
What does it mean to have a high cash flow margin?
It indicates that a company retains a significant portion of its revenue as cash.
62
What does the term 'working capital' refer to?
The difference between current assets and current liabilities.
63
Multiple Choice: Which of the following is NOT a source of cash inflow? A) Sale of goods B) Collection of receivables C) Purchase of equipment D) Issuance of shares
C) Purchase of equipment
64
What does a cash flow statement reveal about a company's financial health?
It shows how well the company generates cash to pay its debts and fund its operating expenses.
65
Fill in the blank: A company must disclose its cash flow statement in its __________.
financial statements
66
True or False: Cash flow statements can be used to forecast future cash flows.
True
67
What is the main difference between cash flow and net income?
Cash flow measures actual cash movements, while net income includes non-cash items like depreciation.
68
Multiple Choice: Which of the following is an example of cash flow from operating activities? A) Buying stocks B) Selling equipment C) Paying salaries D) Borrowing money
C) Paying salaries
69
What is the effect of an increase in accounts payable on cash flow?
It increases cash flow from operating activities.
70
Fill in the blank: The cash flow statement helps investors assess __________.
liquidity
71
For the Operating Activities section, there are two things we need to adjust:
1. Changes in Current Assets and Current Liabilities (working capital accounts) 2. NON-CASH items that affected your net income. ALWAYS ADD BACK the following NON-CASH items that affect your Net INcome because these items DO NOT RESULT WITH NO CASH OUTFLOW: Mnemonic DAD is BI 1. Depreciation Expense 2. Amortization 3. Depletion 4. Bad Debt Expense 5. Impairment Loss

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