Below are a series of statements regarding topics discussed in this chapter. Indicate whether each statement is true (T) or false (F).
1. Increases in non-cash current assets are added to net income when computing net cash flow from operating activities under the indirect method.
2. In the short run, profitable companies that are growing do not necessarily generate sufficient cash from operating activities to finance their day-to-day operations.
3. Financing activities are generally those transactions and events related to the production and delivery of goods and services by businesses.
4. Decision makers use cash flow to evaluate a business’s ability to sustain future growth.
5. In the long run, decision makers prefer companies to generate most of their cash inflows from investing and financing activities.
6. The acquisition and disposition of property, plant, and equipment are examples of operating activities.
7. The indirect method of preparing a statement of cash flows requires certain adjustments to net income to determine the net cash flow from operating activities.
8. Similar to the income statement, the statement of cash flows is prepared for a specific period.
9. Cash flows from investing and financing activities are reported in the same manner under the indirect and direct methods of the statement of cash flows.