21. Which is a source of cash?
A. increase in inventory
B. decrease in bonds payable
C. decrease in accounts payable
D. decrease in accounts receivable
E. increase in prepaid assets
22. Net income for a particular period does not equal cash flow from operations because
A. most firms use the accrual basis of accounting to measure operating performance.
B. most firms typically recognize revenue at the time of sale, independent of when they receive the cash from the sale.
C. some firms receive cash before providing services and recognizing revenues.
D. some firms receive cash after they have provided goods and recognized revenues.
E. all of the above
23. The faster a firm grows, the greater is the shortfall in cash and the firm might borrow funds from the bank on a revolving credit arrangement. Why?
A. Most of the cash outflows for expenses occur before the firm receives the cash inflows from a sale.
B. The lag between cash outflows and cash inflows can lead to cash shortfalls.
C. Cash disbursements to employees and suppliers precede cash collections from customers.
D. all of the above
E. none of the above
24. Which is a use of cash?
A. an increase in inventory
B. a decrease in accounts receivable
C. decrease in equipment
D. an increase in accounts payable
E. an increase in bonds payable
25. The statement of cash flows
A. helps the reader judge a firm’s cash flow needs and how a firm has dealt with them.
B. reflect the cash flows for the period.
C. reports the impact of operations on cash flows.
D. reports the impact of investing activities on cash flows.
E. accomplishes all of the above.
26. Cash equivalents represent _____ in which a firm has temporarily placed excess cash. We use the term cash flows to refer to flows of both cash and cash equivalents.
A. long-term, highly liquid investments
B. short-term, highly liquid investments
C. short-term, highly illiquid investments
D. long-term, highly illiquid investments
E. common stocks and bonds of other companies
27. U.S. GAAP requires that the statement of cash flows explain the changes in the firm's
A. cash and cash equivalents during the accounting period.
B. resources and obligations during the accounting period.
C. components of income from operations during the accounting period.
D. accounts receivable and accounts payable during the accounting period.
E. All of the above are required.
28. The statement of cash flows provides information about
A. the cumulative effects of operations over several years.
B. the balances in shareholders' equity accounts.
C. the relationship between operations and liquidity of a firm.
D. the success of management's cash management strategy.
E. all of the above.
29. Which of the following statements is/are true concerning the statement of cash flows?
A. Cash receipts and disbursements equal revenues and expenses.
B. Cash for short-term obligations must come from operations.
C. The net change in cash will equal the net change in all noncash accounts.
D. All of the above are true statements concerning the statement of cash flows.
E. None of the above are true statements concerning the statement of cash flows.
30. Firms receive cash inflows and disburse cash outflows for investing activities such as to
A. pay dividends.
B. build their productive capacity by acquiring property, plant, and equipment.
C. make debt service payments.
D. all of the above.
E. none of the above.