WGU C213 Topic Five Study Guide Questions and Answers 100% Pass

WGU C213 Topic Five Study Guide Questions and Answers 100% Pass Cash flows are partitioned into three categories... - ANSWER -operating (most important) investing (second most important) financing (third most important) (also have to include non-cash investing and financing transactions) the statement of cash flows provides what? - ANSWER -information that is not readily apparent by looking at just the balance sheet and the income statement Operating cash flow is particularly useful in selected cases when net income does not give an accurate reflection of a company's performance. how do you prepare a statement of cash flows? - ANSWER -One simply scans the list of cash transactions and sorts them into operating, investing, and financing items. how to prepare a statement of cash flows when detailed cash flow information is not available? - ANSWER -a statement of cash flows can be prepared using knowledge of how the three primary financial statements articulate. Operating cash flow can be reported using either the direct or the indirect method. 2 | P a g e Created by ©EmilyCharlene 2025. All rights reserved. 6 step process statement of cash flows - ANSWER -summarizes a company's cash flows for a period of time reports cash inflow and cash outflow during a period, with an emphasis on the amount of CASH GENERATED BY OPERATIONS income statement and statement of cash flows are not replacements for each other - ANSWER -each have a different purpose income statement measures the results of operations for a period of time and the statement of cash flows reports the period's transactions and events in terms of their impact on cash the birth of the statement of cash flows - ANSWER -created in the US in 1988 why was the statement of cash flows created? - ANSWER -sometimes earnings fail, everything is one page, its a powerful forecasting tool sometimes earnings fail (net income) - ANSWER -- big loss scenario: earnings are too pessimistic (makes things look worse than they are) - rapid growth scenario: earnings are too optimistic (if something happens, a lot of other things need to be done. faster growth = harder things will be) - reality check scenario: earnings are too "iffy" (not as reliable) 3 | P a g e Created by ©EmilyCharlene 2025. All rights reserved. everything is on one page - ANSWER -operating activities (things we do routinely every day, the reason we are in business) investing activities (expanding the productive capacity of the business) financing activities (getting the cash for a new expansion and distributing cash to those who have provided financing in the past) forecasting tool - ANSWER -imposes practical numerical discipline on exciting entrepreneurial plans for the future (teaching tool) proper understanding of the statement of cash flows links the balance sheet and the income statement through an understanding of business events pro forma - ANSWER -a predication "forecast" of what the actual cash flow statement will look like in future years if the operating, investing, and financial plans are implemented if you don't like the implications of the forecast, you must change one or more of the assumptions The statement of cash flows replaces the Balance sheet Statement of financial position Income statement 4 | P a g e Created by ©EmilyCharlene 2025. All rights reserved. None of these - ANSWER -None of these The statement of cash flows... Provides a connecting link between two consecutive income statements Summarizes all cash inflows and outflows of an entity for a given period of time Is intended primarily to provide necessary information for assessing the profitability of an entity Is a required statement only for those companies using cash-basis accounting - ANSWER - Summarizes all cash inflows and outflows of an entity for a given period of time