26.Stone decides to use the direct method to compute Soft Corporation's projected cash inputs. Under this method, what will Soft Corporation's projected cash outflow inputs into the manufacturing process be for the year ending December 31, 2005 (in millions)?

A)   -80.0.

B)   +90.0.

C)   +140.0.

D)   -130.0.

27.Which of the following statements about the indirect method of calculating the statement of cash flows is FALSE?

A)   An adjustment is needed for the payment of deferred taxes.

B)   No adjustment is needed to account for extraordinary items because they are found above net income and are thus already accounted for.

C)   Depreciation is added back to net income since it is an expense not requiring cash.

D)   No adjustment is needed to account for changes in accounts receivable since no cash was involved.

28.An analyst has gathered the following information about a company:

Note: the dividend payout ratio equals 45 percent.

What is the net increase or decrease in cash?

A)   -$15.

B)   +$15.

C)   -$20.

D)   +$20.

答案和详解如下：

26.Stone decides to use the direct method to compute Soft Corporation's projected cash inputs. Under this method, what will Soft Corporation's projected cash outflow inputs into the manufacturing process be for the year ending December 31, 2005 (in millions)?

A)   -80.0.

B)   +90.0.

C)   +140.0.

D)   -130.0.

The correct answer was D)

Under the direct method cash inputs = -COGS + decrease in inventory + increase in accounts payable. The calculation for Soft Corporation’s projected cash inputs is as follows:

-90.0 - (150.0 – 100.0) + (101.0 - 91.0) = -130.0

27.Which of the following statements about the indirect method of calculating the statement of cash flows is FALSE?

A)   An adjustment is needed for the payment of deferred taxes.

B)   No adjustment is needed to account for extraordinary items because they are found above net income and are thus already accounted for.

C)   Depreciation is added back to net income since it is an expense not requiring cash.

D)   No adjustment is needed to account for changes in accounts receivable since no cash was involved.

The correct answer was D)

Extraordinary items are reported below income from continuing operations but above net income. You must adjust for changes in the working capital accounts: AR, Inv, and AP.

28.An analyst has gathered the following information about a company:

Income Statement 2005
Sales		$908
Expenses
COGS	$512
Depreciation	6
Selling, General & Admin.	129
Interest	53
Total expenses		700
Pre-tax income		208
Taxes		83
Net income		$125

Balance Sheet
Assets	2004	2005	Liabilities	2004	2005
Cash	60	80	Accts. Payable	100	75
Accts. Rec.	140	155	Wages payable	80	85
Inventories	47	72	Bonds	65	80
Fixed Assets	120	160	Common Stock	40	70
Accum. Depr.	(29)	(35)	Retained Earnings	53	122
Total	338	432		338	432

Note: the dividend payout ratio equals 45 percent.

What is the net increase or decrease in cash?

A)   -$15.

B)   +$15.

C)   -$20.

D)   +$20.

The correct answer was D)

There are two ways to approach this problem. The easy way is to just take the difference in cash between the two years: 80 – 60 = $20

The other way is to create a statement of cash flows:

CFO = Net Income (125) – (increase in Accounts Receivable) (15) – (increase in Inventory) (25) + Depreciation (6) – (decrease in Accounts Payable) (25) + (increase in Wages Payable) (5) = $71.

CFI = Fixed assets increased by $40 representing a use of cash = -$40.

CFF = (issuance of Bonds) (15) + (issuance/sale of Common Stock) (30) – Dividends (56) = -$11

Net increase in cash = 71 – 40 –11 = $20.