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LOS e pay dividends (d) meet obligations 11.14 Free cash flow provides an indication of a company's ability (a) generate profit (b) generate cash to pay dividends (c) generate cash to expand investment 11.16 Which of the following provides a useful comparison with the profit margia? (a) Capital expenditure ratio (b) Cash return on sales ratio. (c) Cash debt coverage (d) Current cash debt coverage LOS QUESTIONS 11.1 What questions about cash are answered by the statement of cash flow me 11.2 Distinguish among the three activities reported in the statement of cash flows. 11.3 Why is it important to disclose certain non-cash transactions? How should they be disclosed? (b) What effect does each phase have on the amounts reported in a statement of cash flows? 11.5 Contrast the advantages and disadvantages of the direct and indirect methods of reporting on cash 11.6 Cameron's Cars reported sales of $2 million for 2018. Accounts receivable increased $200 000 and accounts payable increased $400 000. Calculate cash receipts from customers, assuming that 11.7 The managing director of Fancy Fashion Pty Lid is puzzled. During the last year, the entity experi- enced a loss for the period of $800 000, yet its cash increased 5300000 during the same period of time. Explain to the managing director how this could occur 11.8 Identify five items that form part of the reconciliation of profit and net cash provided by operating 11.9 During 2018. Pencils and More Lid purchased equipment but paid for it with the issue of 2 million SI ordinary shares. Indicate how the transaction would be reported in a statement of cash flows, if at all 11.10 Give an example of a cash-based ratio to measure these characteristics of an entity (a) liquidity (b) solvency (e) profitability CHAPTER 11 Statement of cash flows 729