 | Term | Definition |
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Under the direct method, the formula to calculate cash collected from customers is |
Sales Revenue – Accounts Receivable + Unearned Revenue |
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Which of the following would not be considered an operating cash expense payment? |
Dividends Paid to stockholders |
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Under the direct method of preparing the cash flows from operating activities section of the cash flow statement, what components require adjusting? |
all sales, cost of goods sold, operating expenses, and taxes |
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Under the indirect method of preparing cash flows from operating activities, which of the following is true? |
the indirect method reconciles net income on an accrual basis with cash flow from operating activities on a cash basis |
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When preparing the statement of cash flows under the indirect method |
a. increases in current liabilities are added to net income to calculate operating cash flow; b. depreciation and amortization are added to net income to calculate operating cash flow; c. decreases in current assets are added to net income to calculate operating cash flow |
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What is the normal interpretation of a cash flow pattern where operating cash flows are positive, investing cash flows are negative, and financing cash flows are positive? |
The company is prosperous and growing. Financing cash flow can be used to pursue more growth activities. |
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the objectives of accounting are satisfied by |
a. recording the events affecting a business; b. summarizing the events; c. preparing the financial statements |
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+ [OCF] - [ICF] + [FCF] = {what interpretation} |
the company is prosperous and growing. financing cash flow is used to take advantage of growth opportunities |
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- [OCF] + [ICF] + [FCF] = {what interpretation} |
the company is facing serious financial problems. it is selling assets and using financing activities to meet current cash needs |
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+ [OCF] -or+ [ICF] - [FCF] = {what interpretation} |
the company is prosperous but may not have a lot of good growth opportunities. it is using operating cash to pay off debt to pay stockholders |
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+or- [OCF] + [ICF] - [FCF] = {what interpretation} |
the company may be facing a current cash flow problem. it is selling assets to supplement current cash flow to cover its financing needs. this is especially a problem if the company is short of cash to repay debt |
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increase in current assets = [ what rule ] |
subtract from net income |
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decrease in current assets = [ what rule ] |
add to net income |
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increase in current liabilities = [ what rule ] |
add to net income |
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decrease in current liabilities = [ what rule ] |
subtract from net income |
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non-cash expenses |
add to net income |
| Add or remove terms from this set |
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