True or False?

1. When preparing the operating activities section of the statement of cash flows using the direct method, net income must be adjusted for gains or losses realized when property, plant, and equipment is sold.

2. When the net cash flows from operating, investing, and financing activities are combined to arrive at the overall net change in cash, a net decrease in cash is subtracted from the beginning cash balance to calculate the ending cash balance.

3. Treasury stock purchases made with cash are classified as cash outflows from financing activities on the statement of cash flows.

4. The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

5. Major investing and financing activities that do not involve cash do not have to be reported as part of the statement of cash flows.

6. The payment of interest on bonds is classified as a cash outflow from operating activities on the statement of cash flows.

7. A healthy company typically shows positive cash flows in the financing activities section of the statement of cash flows.

8. In general, the cash flow from operating activities is considered by many to be the most important component of the statement of cash flows.

9. The approach to preparing the cash flow statement relies on the following rearrangement of the balance sheet equation: Change in cash = Change in (Liabilities + Stockholders' Equity + Noncash Assets).

10. In the decline phase, the company continues to enjoy positive operating cash flows but stops spending cash on investing activities and instead uses its cash for financing activities such as repaying lenders and returning excess cash to shareholders.