Exam (elaborations)
Financial Accounting Exam 5 Questions and Answers
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- Accounting
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- Accounting
Financial Accounting Exam 5 Questions and Answers
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Financial Accounting Exam 5 Questionsand Answers
Statement of cash flows - Answer-A financial statement that summarizes a company's
inflows and outflows of cash over a period of time with a purpose to inform users on
how and why a company's cash changed during the period
Operating activities - Answer-Cash inflows and outflows arising from the company's
operations; often called operating cash flows
Investing activities - Answer-Cash inflows and outflows arising from the acquisition and
disposal of non-curet assets; often called investing cash flows
Financing activities - Answer-Cash inflows and outflows associated with the generation
and return of capital; often called financing cash flows
Direct methods - Answer-Method of reporting cash flows from operating activities in
which cash inflows and outflows from operations are reported separately on the
statement of cash flows
Indirect method - Answer-Method of reporting cash flows from operating activities in
which net income is adjusted from an accrual basis to a cash basis
Free cash flow - Answer-The excess cash a company generates beyond what it needs
to invest in productive capacity and pay dividends to stockholders
Cash flow adequacy ratio - Answer-Compares free cash flow to the average amount of
debt maturing in the next five years and measures the ability to pay maturing debt
Purpose of the statement of cash flows - Answer-To inform users on how and why a
company's cash changed during the period
Basic structure of the statements of cash flows - Answer-Cash flows provided (used) by
operating activities
+/- cash flows provided by investing activities
+/- cash flows provided by financing activities
=
Net increase (decrease) in cash
+cash, beginning of year
=
Cash, end of year
3 sections of the statement of cash flows - Answer-Operating
Investing
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