1. The formula to compute free cash flow is

a.Net Cash Flows from Operating Activities + Cash Used to Purchase Property, Plant, and Equipment.

b.Net Cash Flows from Financing Activities + Cash Used to Purchase Property, Plant, and Equipment.

c.Net Cash Flows from Financing Activities Cash Used to Purchase Property, Plant, and Equipment.

d.Net Cash Flows from Operating Activities Cash Used to Purchase Property, Plant, and Equipment.

2. If the free cash flow is $52,500, sales are $210,000, and net income is $120,000, the ratio of free cash

flow to sales is

a.44%.

b.25%.

c.400%.

d. The ratio cannot be computed from this information because cash used to purchase property, plant, and equipment is not given.

3. Ramond Manufacturing, Inc., has a credit balance in its bonds payable account of $85,000 at the end of the current year. The previous year-end balance was zero. Listing this item in the Financing Activities section of the statement of cash flows would indicate that Ramond

a. bought $85,000 worth of bonds as an investment.

b. sold $85,000 worth of its own corporate bonds.

c. paid interest of $85,000 to its bondholders.

d. retired $85,000 worth of its own corporate bonds.

4. The net income reported on the income statement for the current year was $80,100. Depreciation recorded on fixed assets and amortization of patents for the year were $10,200 and $2,200, respectively. The company purchased equipment for $85,300 and an acre of land for $49,300. What amount of cash flows from (used for) investing activities is reported on the statement of cash flows?

a.$147,000

b.$134,600

c.$(134,600)

d.$(41,900)

5. Which of the following is the proper order in which to list activities on the statement of cash flows, using the indirect method?

a. Investing; operating; financing

b. Operating; investing; financing

c. Operating; financing; investing

d. Financing; investing; operating

6. Perriman Company declares and pays a $2.25 dividend per share in the current fiscal year. This cash activity would be listed in the

a. Operating Activities section of the statement of cash flows using the indirect method.

b. Investing Activities section of the statement of cash flows.

c.Financing Activities section of the statement of cash flows.

d.net income amount on the statement of cash flows.

7. When preparing its statement of cash flows, Novelty Game Creators, Inc., reported net income of $277,000, a decrease in accounts payable of $39,000, an increase in bonds payable of $97,000, and an increase in depreciation expense of $28,000. The Financing Activities section would show net cash flows of

a.$374,000.

b.$402,000.

c.$(97,000).

d.$97,000.

8. Which of the following would be considered a long-term asset in the Investing Activities section of the statement of cash flows?

a.Equipment

b.Accounts receivable

c.Accounts payable

d.Inventory