Q1. Financing activities include cash transactions that primarily affect (current asset / long-term asset / current liability

Question:

Q1. Financing activities include cash transactions that primarily affect (current asset / long-term asset / current liability / _______________ / _______________) accounts. (Circle all that apply)
Q2. Identify the transactions that are recorded in the financing section of the statement of cash flows.
(_______________/ Not) a. Issue to Shareholder Adam.
(_______________/ Not) b. Pay dividends to Shareholder Adam.
(_______________/ Not) c. Purchase treasury stock.
(Financing / _______________) d. Record a 2-for-1 stock split. (Non-cash transaction)
(_______________/ Not) e. Issue note payable #1234.
(Financing / _______________) f. Pay interest on note payable #1234. (Operating activity)
(_______________/ Not) g. Repay note payable #1234.
(_______________/ Not) h. Issue preferred stock.
(_______________/ Not) i. Call a bond payable currently outstanding.
Q3. Debt transactions: In 2009 LUV had a net cash (_______________/ outflow), indicating that more debt was (_______________/ repaid), and therefore, is assuming (_______________/ less) financial risk. If debt is issued to finance growth and expansion, it is considered (_______________/ unfavorable). However, if debt is issued because cash from operating activities is insufficient, it is considered (favorable / _______________). Issuing additional debt (does / _______________) dilute earnings per share.
Q4. Capital stock transactions: In 2010 LUV had a net cash (_______________/ outflow), indicating that more stock was (_______________/ purchased). The ability to attract equity investors is (_______________/ unfavorable). A company’s own stock that is bought back with the intent to reissue to shareholders in the future is referred to as (common / preferred / _______________) stock, which (increases / _______________) shares outstanding and results in (_______________/ lower) earnings per share for current shareholders. Therefore, buying back a company’s own stock is regarded (_______________/ unfavorably) by current shareholders.
Q5. LUV is paying (_______________ / random) dividends.
Q6. Which year is LUV’s cash position most appealing to shareholders? (_______________ / 2010 / 2009) Why?
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...