The statement of cash flows is not one of the basic financial statements.
The statement of cash flows shows the effects on cash of a company’s operating, investing, and financing activities.
The statement of cash flows reports a firm’s major sources of cash receipts and major uses of cash payments for an accounting period.
Cash flows from operating activities, as part of the statement of cash flows, include cash transactions that enter into the determination of net income.
To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting
Cash flows from investing activities, as part of the statement of cash flows, include receipts from the sale of land.
Cash flows from financing activities, as part of the statement of cash flows, include repaying long-term debt.
There are two alternatives to reporting cash flows from operating activities in the statement of cash flows: (1) the direct method and (2) the indirect method.
The indirect method of preparing the operating activities section of the statement of cash flows is the method most commonly used by companies because the data is readily available and less costly to prepare than the direct method.
Rarely would the cash flows from operating activities, as reported on the statement of cash flows, be the same as the net income reported on the income statement due to the accrual basis of accounting.
In horizontal analysis, when comparing two years, the current year is the base year.
Solvency analysis focuses on the ability of a business to pay its current and long-term liabilities.
Which of the following is not one of the four basic financial statements?
statement of changes in financial position
The statement of cash flows provides useful information about a company’s ability to do the following:
All of the Above
On the statement of cash flows, the cash flows from operating activities section would include
cash receipts from sales activitities
Cash paid to purchase long-term investments or fixed assets would be reported in the statement of cash flows in
the investing activities section
Cash received from borrowing money or issuing stock should be shown on the statement of cash flows under
On the statement of cash flows, in which section is it most important to have a positive cash flow?
The order of presentation of activities on the statement of cash flows is
Operating; Investing; Financing
Which of the following would not be classified as an operating activity?
payment of dividends
The only financial statement analysis ratio required by GAAP to appear on a financial statement is the
An analysis in which all the components of an income statement are expressed as a percentage of net sales is called
A common-size statement is a useful tool in financial analysis because it allows the user to
make a better comparison of two companies of different sizes in the same industry
The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as
solvency/liquidity and profitability
The ____________ measures how much of the company is financed by debt and how much by equity.
ratio of liabilities to stockholders equity
To asses the profitability of a company’s total assets (earning power of assets), without considering how the assets are financed, one might use the
rate earned on total assets
Corporate annual reports summarize operating activities for the past year and plans for the future. These reports normally include
All of the Above
The operating section of the statement of cash flows for the current year always begins with the
net income for the current year
14. The statement of cash flows provides useful information about a company’s ability to do the following:
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