Question

In: Accounting

1. What does it mean when investing activities are reported on the Statement of Cash Flows?...

1. What does it mean when investing activities are reported on the Statement of Cash Flows? Provide three examples of investing activities.
2. What does it mean when financing activities that are reported on the Statement of Cash Flows? Provide three examples.
3. Both the Direct and Indirect Methods are used to prepare the Cash Flow Statement. What is the difference between these two methods?
4. How do you determine a company’s cash flow from their operating activities using the Indirect Method?
5. What are the four (4) building blocks of financial statement analysis? Explain the purpose of each one.
6. What is the purpose of each of the following ratios and how are they computed?

a. Working capital
b. Acid-test ratio
c. Current ratio

7. What do these ratios tell us about a company Who are the intended users of these ratios?
8. Which type of analysis...

a. Measures key relationships between financial statement items?
b. Compares a company's financial condition across time?
c. Compares a company's financial condition to a base amount?

9. What is the difference between comparative financial statements and common size comparative financial statements?
10. What is the criteria for cash flows to be classified as a cash equivalent?

Please answer all of the questions, if you can not answer all of the questions do not reply.

Expert Solution

1. cash flow from investing activities reports the change in company's cash position resulting from any gains or losses from investments & changes resulting from amount spent on investments in capital assets.

eg. investment in subsidiary , purchase of plant & machinery , collection of loans proceeds.

2. cash flow from financing activities reports external activities that allows for firm to raise capital and repaying investors.

eg. proceeds from issue of long term debt, dividend paid, purchase of non controlling interest.

3. difference between direct and indirect method of cash flow-

main difference - cash flow from operating activities.

under direct method cash flow from operating activities include amounts such as cash receipt from debtors , payment to creditors while indirect method will show net profit followed by adjustments so that net cash income from operating activities will be generated.

4. cash flow from operating activities under indirect method-

Net profit xxx

adjustment for-

non cash items xxx

non operational gains and losses (xxx)/xxx

Income tax (xxx)

change in working capital xxx/(xxx)

5. i) liquidity - purpose- ability to meet short term obligations

ii) solvency - purpose- ability to meet long term obligations

iii) profitability - purpose - ability to generate profits

iv)marketability- purpose- ability to sell products in market and generate revenues.

6. working capital ratio - purpose - finding out working capital position of enterprise.

computation= current assets/current liabilities

acid test ratio- purpose - ability of company to use its near cash & quick assets for meeting immediate liabilities.

computation- cash + accounts receivables + short term investments/ current liabilities

current ratio- purpose - to find out ratio of current assets to current liabiliies

computation- current assets/ current liabilities

7.These ratio tells company's position as per different scenarios.

intended users - investors, board of directos, external auditors, internal auditor

10. criteria for cash flow to be classified as cash quivalents- highly liquid investments having a maturity of three months or less.

ekkarill92 answered 1 year ago

Q1 - Cash flows from investing activities, as part of the statement of cash flows, include:...

Q1 - Cash flows from investing activities, as part of the statement of cash flows, include: a. Collections from customers. b. Receipts from the sale of land. c. Issuing a company’s own stocks. d. Paying dividends. Q2 - The method that uses cash account to prepare cash flow from operating activities section of cash flow statement is: a. Direct Method b. Reciprocal Method c. Indirect Method d. Direct Write off Method Q3- A company’s net sales and average accounts receivables...

Prepare the cash flows from investing and financing activities sections of HHC's statement of cash flows.

The following are summary cash transactions that occurred during the year for Hilliard Healthcare Co. (HHC): Cash Received from: Customers ........................................................$660,000 Interest on note receivables ..........................12,000 Collection of note receivable.......................100,000 Sale of land ..........................................................40,000 Insurance of common stock..........................200,000 Cash paid for: Interest on note payable .................................18,000 Purchase of equipment .................................120,000 Operating expenses .......................................440,000 Dividends to shareholders .............................30,000 Prepare the cash flows from investing and financing activities sections of HHC's statement of cash flows.

The statement of cash flows begins with the Financing activities section. Operating activities section. Investing activities...

The statement of cash flows begins with the Financing activities section. Operating activities section. Investing activities section. Last year's ending cash balance. In which section of the statement of cash flows each item would be reported? Paid cash for office supplies (Click to select)Operating ActivitiesInvesting ActivitiesFinancing Activities Paid cash for a computer (Click to select)Operating ActivitiesInvesting ActivitiesFinancing Activities Distributed cash dividend (Click to select)Operating ActivitiesInvesting ActivitiesFinancing Activities Received cash for services (Click to select)Operating ActivitiesInvesting ActivitiesFinancing Activities Purchased treasury stock...

1)Distinguish among the three activities reported in the statement of cash flows. 2)Why is it important...

1)Distinguish among the three activities reported in the statement of cash flows. 2)Why is it important to disclose certain non-cash transactions? How should they be disclosed?

1. When preparing the operating activities section of the statement of cash flows using the indirect...

1. When preparing the operating activities section of the statement of cash flows using the indirect method, non-operating losses are subtracted from net income. True or false? 2. When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current operating assets are subtracted from net income. True or false? 3. When preparing the operating activities section of the statement of cash flows using the indirect method, non-operating gains are subtracted from net...

1. Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for...

1. Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the current year was $118,900. Depreciation recorded on store equipment for the year amounted to $19,600. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $45,900 $42,230 Accounts receivable (net) 32,910 31,210 Merchandise inventory 44,940 47,510 Prepaid expenses 5,050 4,010 Accounts payable (merchandise creditors) 43,010 39,950...

Cash Flows from Operating Activities—Direct Method The cash flows from operating activities are reported by the...

Cash Flows from Operating Activities—Direct Method The cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine the following: a. If sales for the current year were $509,900 and accounts receivable decreased by $32,600 during the year, what was the amount of cash received from customers? $ b. If income tax expense for the current year was $44,200 and income tax payable decreased by $4,400 during the year, what was the amount...

Explain the value of separating cash flows into operating activities, investing activities, and financing activities to...

Explain the value of separating cash flows into operating activities, investing activities, and financing activities to financial statement users in analyzing cash flows and the company's financial performance and condition.

Listed below are transactions that might be reported as investing and/or financing activities on a statement of cash flows. Possible reporting classifications of those transactions are provided also.

Listed below are transactions that might be reported as investing and/or financing activities on a statement of cash flows. Possible reporting classifications of those transactions are provided also. Required: Indicate the reporting classification of each transaction by entering the appropriate classification code.

Classifications of Cash Flows. A company's statement of cash flows and the accompanying schedule of investing...

Classifications of Cash Flows. A company's statement of cash flows and the accompanying schedule of investing and financing activities not affecting cash may contain the following major sections: Operating Activities Investing Activities Financing Activities Investing and Financing Activities Not Affecting Cash The following is a list of items that might appear on a company's statement of cash flows or in the accompanying schedule. Required: Using the letters A through D, indicate in which section of the statement of cash flows...