Reading 34: Understanding the Cash Flow Statement - LOS f, style, black, direct, convert, class

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41.To convert an indirect statement of cash flows to a direct basis, the analyst would:

A)   subtract any depreciation that was included in the cost of goods sold.

B)   subtract decreases in accounts receivables from net sales.

C)   add decreases in accounts payable to the cost of goods sold.

D)   add decreases in inventory to the cost of goods sold.

42.To convert an indirect statement of cash flows to a direct basis, the analyst would:

A)   subtract write-offs of inventory advances from the cost of goods sold.

B)   add increases in accounts receivables to net sales.

C)   subtract decreases in inventory from the cost of goods sold.

D)   subtract decreases in accounts payable from the cost of goods sold.

 

43.To convert an indirect statement of cash flows to a direct basis, the analyst would:

A)   add decreases in accounts receivables to net sales.

B)   subtract customer cash advances from net sales.

C)   subtract increases in accounts payable from the cost of goods sold.

D)   add increases in inventory to the cost of goods sold.

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答案和详解如下：

41.To convert an indirect statement of cash flows to a direct basis, the analyst would:

A)   subtract any depreciation that was included in the cost of goods sold.

B)   subtract decreases in accounts receivables from net sales.

C)   add decreases in accounts payable to the cost of goods sold.

D)   add decreases in inventory to the cost of goods sold.

The correct answer was D)

Decreases in inventory represent a source of cash so these would be added to the negative cost of goods sold figure (i.e. make it less negative). Any depreciation and/or amortization included in the cost of goods sold does not represent an actual use of cash, so this amount should be added to the negative cost of goods sold figure (i.e. make it less negative). A decrease in accounts receivables represents an increase in cash so this should be added to the sales figure. Decreases in accounts payable represent a use of cash so these should be subtracted from the negative cost of goods sold figure (i.e. make it more negative).

42.To convert an indirect statement of cash flows to a direct basis, the analyst would:

A)   subtract write-offs of inventory advances from the cost of goods sold.

B)   add increases in accounts receivables to net sales.

C)   subtract decreases in inventory from the cost of goods sold.

D)   subtract decreases in accounts payable from the cost of goods sold.

The correct answer was D)

Decreases in accounts payable represent a decrease in cash so these should be subtracted from the negative cost of goods sold figure (i.e. make it more negative). A write-off of inventory (e.g. from applying lower of cost or market) does not represent an actual use of cash, so this amount should be added to the negative cost of goods sold figure (i.e. make it less negative). An increase in accounts receivables represents a cash drain so this should be subtracted from the sales figure. Decreases in inventory represent a source of cash so these would be added to the cost of goods sold figure (i.e. make it less negative).

43.To convert an indirect statement of cash flows to a direct basis, the analyst would:

A)   add decreases in accounts receivables to net sales.

B)   subtract customer cash advances from net sales.

C)   subtract increases in accounts payable from the cost of goods sold.

D)   add increases in inventory to the cost of goods sold.

The correct answer was A)

A decrease in accounts receivables represents an increase in cash so this should be added to the sales figure. Cash advances from customers represent a source of cash so these should be added to sales. Increases in accounts payable represent an increase in cash so these should be added to cost of goods sold (which is a negative number). Increases in inventory represent a use of cash so these would be subtracted from cost of goods sold.