Following are a series of statements regarding topics discussed in this chapter.
Required:
Indicate whether each statement is true (T) or false (F).
(a) Increases in noncash current liabilities are added to net income when computing net cash flow from operating activities under the indirect method.
(b) Profitable companies do not necessarily generate sufficient cash to finance their day to-day operations.
(c) Operating activities are generally those transactions and events related to the production and delivery of goods and services by businesses.
(d) Decision makers prefer companies to generate most of their cash inflows from investing and financing activities.
(e) Cash flows from all types of activities are reported differently under the indirect and direct methods of preparing a statement of cash flows.
(f) The acquisition and disposal of property, plant, and equipment are examples of financing activities.
(g) Decision makers use free cash flow to evaluate a business’s ability to sustain future growth.
(h) The direct method of preparing a statement of cash flows requires that certain adjustments be made to net income to determine the net cash flow from operating activities.
(i) Similar to the income statement, the statement of cash flows is prepared for a specific time.
(j) International Financial Reporting Standards allow businesses to report cash flow per share in their financial statement footnotes.
(k) Free cash flow is normally calculated both in total and on a per share basis.
(l) The amount of dividends paid is computed as the beginning balance of Retained Earnings plus net income minus the ending balance of Retained Earnings.