Reference no: EM132581318

Question 1. Which of the following items is included in the adjustment of net income to obtain cash flows from operating activities?

a. Depreciation expense for the period.

b. The change in deferred taxes

c. The amount by which equity income recognized exceeds cash received.

d. All of the above

Question 2. Which statement is true for gains and losses from capital asset sales?

a. They do not affect cash and are excluded from the statement of cash flows

b. They are included in cash flows from operating activities

c. They are included in cash flows from investing activities

d. They are included in cash flows from financing activities

Question 3. Which of the following assets is included in the adjustment of next income to obtain cash flow from operating activities?

a. Accounts Receivable b. Inventory

c. Prepaid Expenses d. All of the above

Question 4. Which of the following current liability accounts is included in the adjustment of expenses to obtain cash flow from operating activities?

a. Accounts Payable

b. Notes Payable and Current maturities of long-term debt.

c. Accrued Liabilities

d. Both (a) and (c)

Question 5. How is it responsible for a firm to be profitable and still go bankrupt?

a. Earnings have increased more rapidly than sales

b. The firm has a positive net income but has failed to generate cash from operations

c. Net income has been adjusted for inflation

d. Sales have not improved even though credit policies have been eased.

Question 6. Why has cash flow from operations become increasingly important as an analytical tool?

a. Inflation has distorted the meaningfulness of net income

b. High interest rates can put the cost of borrowing to cover short term cash needs out of reach for many firms.

c. Firms may have uncollected accounts receivable and unstable inventory of the books

d. All of the above

Question 7. Which of the following statement is false?

a. A negative cash flow can occur in a year in which net income is positive

b. An increase in accounts receivable represents accounts not yet collected in cash

c. An increase in accounts payable represents accounts not yet collected in cash

d. To obtain cash flow from operations, the reported next income must be adjusted,

Question 8. Which of the following could lead to cash flow problems?

a. Obsolete inventory, accounts receivable of inferior quality, easing of credit by suppliers.

b. Slow-moving inventory, accounts receivable of inferior quality, tightening of credit by suppliers

c. Obsolete inventory, increasing notes payable, easing of credit of suppliers

d. Obsolete inventory, improved quality of accounts receivable easing of credit by suppliers.

Question 9. Operating decisions primarily deal with

a. the use of scarce resources

b. how to obtain funds to acquire resources

c. acquiring equipment and buildings

d. satisfying shareholders

Question 10. Investing decisions primarily deal with

a. the use of scarce resources

b. how to obtain funds to acquire resources

c. acquiring equipment and buildings

d. preparing financial statements to shareholders