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

1. The cash flows from operations section of the statement of cash flows prepared using the indirect approach includes:

a. Net income on an accrual basis.

b. Adjustments for noncash expenses.

c. Adjustments to remove gains and losses on the sale of noncurrent assets.

d. All of the above.

2. Which of the following has the effect of increasing cash flows?

a. Accounts receivable increases more than inventory increases.

b. Accounts receivable increases less than inventory increases.

c. Accounts receivable and inventory both decrease.

d. Accounts receivable and inventory both increase.

3. The statement of cash flows ties together the other financial statements by:

a. Reporting the adjustments necessary to reconcile net income and cash generated by operations.

b. Reporting all changes in the balance sheet in terms of their effects on cash.

c. Separating cash flow activities into operating, investing, and financing.

d. All of the above.

4. The statement of cash flows is divided into three main categories. These categories are:

a. Operating, investing, and cash collections.

b. Operating, marketing, and investing.

c. Cash outflows, cash inflows, and noncash activities.

d. Operating, investing, and financing.

5. Which of the following describes the content of the categories of the statement of cash flows?

a. Cash flows from operations are routine in nature and usually are expected to be repetitive.

b. Cash flows related to investing reflect the use of cash for the purchase of new plant and equipment.

c. Cash flows from financing reflect amounts received by borrowing or from issuing stock.

d. All of the above.