Question

1. Under the indirect method of calculating operating cash flows, which of the following would be added to net income?
a. Increase in current assets
b. Non-cash expenses
c. Gain on sale of equipment
d. Decrease in current liabilities
2. Which of the following activities would not be classified under the investing activities section on the statement of cash flows?
a. Cash paid for the stock of another company
b. The purchase of new equipment
c. Cash paid to purchase treasury stock
d. Buying a patent from a competitor
3. A review of Smith Inc.'s balance sheet shows that the balance in long-term investments increased $12,000 during the year while the balance in the equipment account increased $55,000. Additional information shows that the company sold for $5,000 cash some equipment with a cost of $15,000. What is the net cash used in investing activities for the prior year?
a. $77,000
b. $67,000
c. $72,000
d. None of the above
4. Which of the following activities would not be classified under the financing activities section of the statement of cash flows?
a. Issuance of common stock for cash.
b. Payment of principal on bonds.
c. Cash received from a note issued to a creditor.
d. Dividends declared but not yet paid.
5. If a company issues long-term debt for $50,000 in cash, declares and pays dividends of $15,000, and announces plans to repurchase $25,000 worth of treasury stock, what is the net cash provided (used) by financing activities?
a. $10,000 provided
b. $10,000 used
c. $40,000 provided
d. $35,000 provided
6. The cash flow adequacy ratio:
a. Compares free cash flow to the average amount of debt maturing in five years.
b. Provides an indication of a company's ability to generate enough cash to pay its debts.
c. Both a and b
d. Neither a nor b
7. Free cash flow is calculated as:
a. Net income less capital expenditures and dividends
b. Cash from operating activities less capital expenditures
c. Cash from operating activities less net income
d. Cash from operating activities less capital expenditures and dividends


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  • CreatedJuly 16, 2015
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