1. A profitable firm can never run out of cash.
2. Using the accrual basis of accounting to measure net income creates the need for a separate financial statement that reports the impact of operations on cash flows.
3. Cash equivalents represent long-term, highly liquid investments in which a firm has temporarily placed excess cash.
4. The second section of the statement of cash flows shows the amount of cash flow from investing activities.
5. Under U.S. GAAP, the statement of cash flows classifies cash expenditures for interest on debt as an operating activity but classifies cash expenditures for dividends to shareholders as a financing activity.
6. On the statement of cash flows, cash sale of property, plant and equipment used for the last 5 years in the company's operations is treated as an operating activity.
7. On the statement of cash flows, the issuance of capital stock for cash to be used for future expansion of a production facility is treated as an investing activity.
8. IFRS permits firms to classify cash from interest and dividend revenue as operating, investing, or financing activities, provided the classification is consistently applied across periods.
9. Under both U.S. GAAP and IFRS, the issue or redemption of debt is a financing activity.
10. Although the guidance in U.S. GAAP and IFRS states a preference that companies present cash flows from operations using the indirect method, most companies present cash flows from operations as a reconciliation of net income to operating cash flow (the direct method).