The Cash Flow Cycle includes which of the following activities:

Question 1The Cash Flow Cycle includes which of the following activities:

 

Answers:            

 

A. Setup

 

B. Production

 

C. Sales

 

D. All of the above

 

Question 2Capital Expenditures is the amount spent for contract labor used in the business, and reported under Cash for Investing.

 

Answers:            

 

True

 

False

 

Question 3Most small businesses, and all large ones, favor accrual basis books over cash basis books for all of the following reasons EXCEPT:

 

Answers:            

 

A. They’re concerned about the profit margin on products they sell.

 

B. They want to know when they’re making money and when they’re not.

 

C. Accrual basis accounting always shows a higher profit than cash basis of accounting.

 

D. They’re required by lenders, investors or government authorities to report their activities using accrual basis accounting

 

Question 4Free Cash Flow is defined as:

 

Answers:            

 

A. A measure of ongoing cash flow from normal business activities (including CapEx)

 

B. A list of dividend payments made to shareholders.

 

C. Any cash flow given as bonus compensation to executives.

 

D. Cash flows raised from debt and equity offerings.

 

Question 5Which of the following transactions does NOT lower Cash:

 

Answers:            

 

A. Paying salaries

 

B. Paying for equipment

 

C. Paying off a loan balance

 

D. Receiving money from investors

 

Question 6The Pumice Stone Company has the following measurements ready for its Statement of Cash Flows:

 

Beginning Cash Balance $125,300

 

Acquisitions $400,000

 

Net cash flow from Operating Activities $297,600

 

Net cash flow from Investing Activities ($328,400) (negative/use)

 

Net cash flow from Financing Activities $250,000

 

Answers:            

 

A. $344,500

 

B. $232,600

 

C. $55,700

 

D. ($205,100)

 

Question 7Earnings per Share is a more important financial measure than cash flow for private equity firms.

 

Answers:            

 

True

 

False

 

Question 8The BesTest Sprinkler Company engaged in the following Financing Activities during the year 2020:

 

Issuance of new Debt $ 10,000,000

 

Repayment of Debt $7,000,000

 

Payment of Dividends $750,000

 

Sale of Stock $2,500,000

 

What are the Net Borrowings?

 

Answers:            

 

A. $ 3,000,000

 

B. $ 5,500,000

 

C. $ 10,000,000

 

D. $ 4,750,000

 

Question 9A cash flow statement is basically a reconciliation of the company’s purchase log.

 

Answers:            

 

True

 

False

 

Question 10The Cash Flow Statement measures “how much money, net of everything else, have I made this year, and how much will I have going forward next year”, according to Jack Welch.

 

Answers:            

 

True

 

False

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