Following are a series of statements regarding topics discussed in this chapter.
Indicate whether each statement is true (T) or false (F).
(a) Increases in noncash current liabilities are added to net income when computing net cash ﬂow from operating activities under the indirect method.
(b) Proﬁtable companies do not necessarily generate sufﬁcient cash to ﬁnance their day to-day operations.
(c) Operating activities are generally those transactions and events related to the production and delivery of goods and services by businesses.
(d) Decision makers prefer companies to generate most of their cash inﬂows from investing and ﬁnancing activities.
(e) Cash ﬂows from all types of activities are reported differently under the indirect and direct methods of preparing a statement of cash ﬂows.
(f) The acquisition and disposal of property, plant, and equipment are examples of ﬁnancing activities.
(g) Decision makers use free cash ﬂow to evaluate a business’s ability to sustain future growth.
(h) The direct method of preparing a statement of cash ﬂows requires that certain adjustments be made to net income to determine the net cash ﬂow from operating activities.
(i) Similar to the income statement, the statement of cash ﬂows is prepared for a speciﬁc time.
(j) International Financial Reporting Standards allow businesses to report cash ﬂow per share in their ﬁnancial statement footnotes.
(k) Free cash ﬂow is normally calculated both in total and on a per share basis.
(l) The amount of dividends paid is computed as the beginning balance of Retained Earnings plus net income minus the ending balance of Retained Earnings.