Which of the following items would NOT be included in cash flow from investing?
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Selling stock of the company would be a financing cash flow.
Which of the following is least likely a cash flow in the calculation of cash flow from operations under U.S. GAAP?
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According to SFAS 95, dividends paid are treated as cash flow from financing.
Which of the following does NOT represent a cash flow relating to operating activity?
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Dividends paid to stockholders are considered cash flow relating to financing activity. However, U.S. GAAP requires interest paid to bondholders to be considered an operating activity.
Interest payments, either as part of a coupon payment or to creditors, are always considered which type of cash flow?
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Any type of interest payment is always going to be considered an operating cash flow.
Which of the following is NOT a cash flow from operation?
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Dividends paid are a financing cash flow. Dividends received and interest paid are both operating cash flows.
Holden Company’s fixed asset footnote included the following:
Calculate Holden’s cash flow from investing activities for the year ended 20X7.
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Given the gain of $100,000 and book value of the machinery sold of $260,000 ($500,000 original cost – $240,000 accumulated depreciation), the proceeds from the sale of the machinery were $360,000 ($100,000 gain + $260,000 book value). For 20X7, CFI was an outflow of $40,000 ($360,000 sale proceeds – $400,000 machinery purchase). The $600,000 financed by the seller is a non-cash transaction and is reported in the notes to the cash flow statement.
Which of the following would NOT be a component of cash flow from investing?
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Dividends paid is not a component of cash flow from investing, it is a component of cash flow from financing. The other items are all components of cash flow from investing.
What are the main components of cash flow from operations?
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The main components of cash flow from operations are changes in working capital items (accounts receivable, inventory, accounts payable), and items that flow through the income statement. Capitalization activities, sale of assets and purchases of securities would all be part of cash flows from investing. Repayment of bonds and issuance of common stock would also be part of cash flows from financing. The stock split would be a non-cash activity.
Which of the following should be classified as cash flows from investing (CFI) by Elegant, Inc., which reports under U.S. GAAP?
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Purchases of equipment are considered to be cash flows from investing. Interest paid or received and dividends received are considered to be cash flows from operations under U.S. GAAP.
Which of the following items is NOT found in the financing cash flow part of the statement of cash flows?
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Changes in retained earnings are not included in the calculation of financing cash flows.
Jodi Lein, small business consultant, is currently working with RJ Landscaping, a sole proprietorship. She is trying to educate the owner on the importance of monitoring cash flows. Operating information as of the end of the most recent month appears below:
Using this information, what is the cash flow from operations for the month?
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The format of the question information suggests the use of the direct cash flow method. In this method, depreciation is not a component of cash flow from operations. Cash flow from operations = (all numbers in thousands of dollars) 45 – 17 – 22 – 6.3 – 1.0 = -1.3, or -$1,300.
An examination of the cash receipts and payments of Xavier Corporation reveals the following:
Cash paid to suppliers for purchase of merchandise
$5,000
Cash received from customers
14,000
Cash paid for purchase of equipment
22,000
Dividends paid
2,000
Cash received from issuance of preferred stock
10,000
Interest received on short-term investments
1,000
Wages paid
4,000
Repayment of loan to the bank
5,000
Cash from sale of land
12,000
Under U.S. GAAP, Xavier’s reported cash flow from operations will be:
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Cash flow relating to operating activities includes cash paid to suppliers, cash received from customers, interest received, and wages paid. –5,000 + 14,000 + 1,000 + –4,000 = 6,000.
An examination of the cash receipts and payments of Xavier Corporation reveals the following:
Cash paid to suppliers for purchase of merchandise
$5,000
Cash received from customers
14,000
Cash paid for purchase of equipment
22,000
Dividends paid
2,000
Cash received from issuance of preferred stock
10,000
Interest received on short-term investments
1,000
Wages paid
4,000
Repayment of loan to the bank
5,000
Cash from sale of land
12,000
Xavier's cash flow from financing (CFF) and cash flow from investing (CFI) will be:
| CFF | CFI |
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Cash flow relating to financing activities includes dividends paid, cash received from preferred stock, and repayment of loan. -2,000 + 10,000 + -5,000 = 3,000. Cash flow relating to investing activities includes cash paid for equipment and cash from sale of land. -22,000 + 12,000 = -10,000.
In preparing its cash flow statement for the year ended December 31, 2004, Giant Corporation collected the following data:
Gain on sale of equipment
$6,000
Proceeds from sale of equipment
10,000
Purchase of Zip Co. bonds for
180,000 (maturity value $200,000)
Amortization of bond discount
2,000
Dividends paid
(75,000)
Proceeds from sale of Treasury stock
38,000
In its December 31, 2004, statement of cash flows, what amounts should Giant report as net cash used in investing activities and net cash used in financing activities?
| Investing Activities | Financing Activities |
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Investing Activities: Financing Activities: Note that the question asked for net cash used therefore this is a positive cash outflow.
$10,000 – $180,000 = -$170,000 cash flow from investing or $170,000 used
$38,000 ? $75,000 = -$37,000 cash flow from financing or $37,000 used
Which of the following items is least appropriately described as a liability arising from an operating activity for a non-financial company?
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The current portion of long-term debt arises from a financing activity. The other items listed arise from operating activities.
Which of the following choices most accurately illustrates an operating liability and which most accurately illustrates a financing liability?
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Operating liabilities |
Financing liabilities |
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Operating liabilities result from the operations of the firm and consist of operating and trade liabilities such as accounts payable, customer advances, and accrued liabilities. Financing liabilities are a result of prior financing inflows. Financing liabilities (current) include short-term notes payable and the current maturities of long-term debt.
When a U.S. company pays dividends to its stockholders, which type of cash flow does this represent?
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Dividends paid to stockholders are considered cash outlays from financing according to U.S. GAAP.
If Jackson Ski Company issues common stock, and uses the proceeds to purchase fixed assets such as equipment:
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Cash flow from financing increases when stock is issued, while cash flow from investing decreases when spending for purchases of fixed assets.
Which of the following items would least likely be included in cash flow from financing?
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Gains or losses will be found in cash flow from investments.
Which of the following is NOT a category on the statement of cash flows? Cash flow from:
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There are only three types of cash flows: financing, investing, and operating.
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