Chap013 - Chapter 13 - "How Well Am I...

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Unformatted text preview: Chapter 13 - "How Well Am I Doing?" Statement of Cash Flows Chapter 13 "How Well Am I Doing?" Statement of Cash Flows True / False Questions 1. In the statement of cash flows, increases in a company's capital stock accounts are treated as a "use" rather than as a "source" of cash. True False 2. When computing the net cash provided by operating activities under the indirect method on the statement of cash flows, a decrease in common stock would be added to net income. True False 3. Under the indirect method of determining the net cash provided by operating activities on the statement of cash flows, increases in current assets such as prepaid expenses are subtracted from net income. True False 4. A change in deferred taxes is considered to be an investing activity on the statement of cash flows. True False 5. Activities such as the purchase of inventory on account should be included as part of a company's financing activities on the statement of cash flows. True False 6. Transactions that involve acquiring or disposing of noncurrent assets are generally classified as investing activities on the statement of cash flows. True False 13-1 Chapter 13 - "How Well Am I Doing?" Statement of Cash Flows 7. The issuance of a stock dividend will appear in the financing activities section of the statement of cash flows. True False 8. When a company prepares its statement of cash flows under the indirect method, an increase in depreciation expense will also increase the net cash provided by operating activities. True False 9. Free cash flow is net cash provided by operating activities less capital expenditures and dividends. True False 10. Positive free cash flow suggests that the company did not generate enough cash flow from its operating activities to fund its capital expenditures and dividend payments. True False 11. Negative free cash flow invariably signals poor performance. True False 12. A newly formed company with enormous growth prospects would be expected to have positive free cash flow during its start-up phase. True False 13. For purposes of preparing a the statement of cash flows, cash equivalents consist of short- term, highly liquid investments such as treasury bills, commercial paper, and money market funds that are made solely for the purpose of generating a return on funds that are temporarily idle. True False 13-2 Chapter 13 - "How Well Am I Doing?" Statement of Cash Flows 14. For external reporting purposes, the FASB recommends the indirect method of determining the net cash provided by operating activities on the statement of cash flows. True False Multiple Choice Questions 15. Which of the following would be considered a "use" of cash for purpose of constructing a statement of cash flows?...
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Chap013 - Chapter 13 - "How Well Am I...

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