Read the following MCQs and rectify the errors:

I. The primary purpose of the statement of cash flows is to report all major cash receipts (inflows) and cash payments (outflows) during a period.

True False

2. The statement of cash flows reports and proves the net change in cash for a reporting period.

True False

3. To be classified as a cash equivalent, the only criterion an item must meet is that it must be readily convertible to a known amount of cash.

True False

4. The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

True False

5. Internal users of the statement of cash flows often use cash flow information to plan day-to-day operating activities and make long-term investment and financing decisions.

True False

5. Internal users of the statement of cash flows often use cash flow information to plan day-to-day operating activities and make long-term investment and financing decisions.

True False

6. A cash equivalent must be readily convertible to a known amount of cash, and must be sufficiently close to its maturity so its market value is unaffected by interest rate changes.

True False

7. Business activities that generate or use cash are classified as operating, investing, or financing activities on the statement of cash flows.

True False

8. Financing activities include (a) the purchase and sale of long-term assets, (b) the purchase and sale of short-term investments, and (c) lending and collecting on loans.

True False

9. Cash paid for merchandise is an operating activity.

True False

10. The purchase of stock in another company is classified as a financing activity.

True False

Answer rating: 100% (QA)

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