Chapter 10

A statement of cash flows reports a company’s
1. Gains and losses from cash transactions
2. Assets, liabilities and equity
3. Cash from its operations
4. Income and expenses
Which question is least likely to be addressed by a statement of cash flows?
1. Are the normal operating activities capable of satisfying the need for cash?
2. What are the sources of the company’s revenues?
3. Is a surplus of cash used for repayment of debt or for new investments?
4. Is a shortage of cash compensated by issuing new share capital?
5. Does the company distribute dividends?
A net profit for the period necessarily leads to:
1. A positive net cash flow from operations
2. A positive net cash flow from financing activities
3. A negative net cash flow from operations
4. A positive net cash flow from investing activities
5. None of the above necessarily follows from a net profit for the period
A payment of income taxes would be reported in the statement of cash flows as
1. An operating cash flow
2. A financing cash flow
3. An investing cash flow
4. None of the above, as the transaction would not be included in the statement of cash flows
The proceeds of a sale of a manufacturing plant would be reported in the statement of cash flows as
1. An operating cash flow
2. A financing cash flow
3. An investing cash flow
4. None of the above, as the transaction would not be included in the statement of cash flows
Entering a new finance lease would be reported in the statement of cash flows as
1. An operating cash flow
2. A financing cash flow
3. An investing cash flow
4. None of the above, as the transaction would not be included in the statement of cash flows
Paying interest on a trade payable account would be reported in the statement of cash flows as
1. An operating cash flow
2. A financing cash flow
3. An investing cash flow
4. None of the above, as the transaction would not be included in the statement of cash flows
Receipts on customer receivables would be reported in the statement of cash flows as
1. An operating cash flow
2. A financing cash flow
3. An investing cash flow
4. None of the above, as the transaction would not be included in the statement of cash flows
Which of the following is not needed to convert a net operating profit into a net cash flow from operations?
1. Adjust for changes in the balances of inventories
2. Eliminate non-cash revenues
3. Eliminate non-cash finance income
4. Adjust for changes in the balances of trade payables
5. All of the choices provided are needed for the conversion
Which of the following is not needed to convert a net profit for the period into a net cash flow from operations?
1. Eliminate non-operating gains and losses
2. Eliminate non-cash revenues
3. Eliminate non-cash finance income
4. Adjust for changes in the balances of trade receivables
5. All of the choices provided are needed for the conversion
Which of the following financial statements reflect activity for a period of time?
1. Both the income statement and the statement of cash flows
2. Only the statement of cash flows
3. Only the income statement
4. Both the income statement and the statement of financial position
5. Only the statement of financial position
The financial statements interrelate in the sense that
1. The statement of cash flows reports the net cash from operations for the same time period for which the financial position is shown on the income statement
2. The statement of financial position shows the results of operations for a period of time, and the income statement presents earnings as of the end of that period
3. The income statement reports net income for a period of time, and the related statement of financial position portrays the financial position at the end of that period
4. Both a and c are true
5. None of the above are true
Which of the following transactions is not a non-cash transaction?
1. A barter transaction
2. The acquisition of an asset through a finance lease
3. A conversion of debt into equity
4. The retirement of a bank loan
Which method do most companies use to develop and present their statement of cash flows?
1. Translation method;
2. Indirect method
3. Consolidation method
4. Direct method
5. Equity method
Which combination of financial statements would provide the most relevant information to assess a company’s short-term liquidity?
1. Statement of financial position and income statement
2. Balance sheet and statement of cash flows
3. Income statement and statement of cash flows
4. Statement of cash flows and Statement of changes in equity

Chapter 10

Quiz