Multiple Choice: Cash Flows Select the correct answer for each of the following:

1. If a company is expanding, purchases of operating assets normally:

a. Are treated as a deduction from depreciation expense in determining the change in cash flow from operations.

b. Will be larger than the cash generated from issuing additional bonds or stocks.

c. Will be larger than the depreciation expense adjustment to operating cash flows.

d. All of the above.
Free cash flow is a measure of:

a. The amount of cash that is generated by operations after maintaining productive capacity.

b. The cash flow that is left after paying off debt.

c. The cash flow used to retire stock and pay dividends.

d. The ratio of cash flow to total assets.
The financing section of the statement of cash flows reports:

a. The amount of cash made available by recording depreciation expense for the year.

b. The cash effects of borrowing, repaying debt, issuing stock, repurchasing stock, and paying dividends.

c. The amount of cash used to increase operating assets or long-term investments.

d. The cash used to pay interest on long-term debt and dividends on outstanding stock.
The payment of cash dividends is:

a. Limited to free cash flow.

b. Limited to cash flow generated from operations.

c. Reported in the financing section of the cash flow statement.

d. Limited to the cash flow from operations, less any cash used to purchase investments.
The statement of cash flows presents a comprehensive look at the changes in financial position beyond the information reported in the balance sheet when:

a. Property, plant, and equipment is both purchased and sold during the period.

b. Long-term debt is retired and new debt is issued.

c. Intangible assets are increased by the purchase of trademarks and copyrights and decreased by annual amortization.

d. All of the above.