Cash Flow Quiz

A company sells a piece of machinery for cash. Where would this transaction be classified on the statement of cash flows?

• Operating Activities

• Investing Activities

• Financing Activities

• It is not a cash flow item

A company pays back a long-term bank loan. How is this transaction reported on the statement of cash flows?

• Cash Inflow from Operating Activities

• Cash Outflow from Investing Activities

• Cash Outflow from Financing Activities

• Cash Inflow from Financing Activities

Which of the following is an example of a cash outflow from operating activities?

• Issuing new shares of common stock

• Purchasing a building for future use

• Payment of salaries to employees

• Repaying a bond payable

Under the indirect method, which item is added back to net income to calculate cash flow from operations?

• Gain on the sale of equipment

• Increase in accounts receivable

• Depreciation expense

• Dividends paid

A company issues a dividend to its shareholders. Where would this transaction be classified?

• Operating Activities

• Investing Activities

• Financing Activities

• Non-cash transaction

An increase in a company's accounts payable would be shown as what on the statement of cash flows (indirect method)?

• A deduction from net income

• An addition to net income

• A cash outflow from investing activities

• A cash inflow from financing activities

Which of the following would be classified as a cash outflow from investing activities?

• Payment of interest on a bank loan

• Purchase of a new manufacturing plant

• Repayment of the principal of a bank loan

• Payment of dividends to shareholders

A company issues new long-term debt. Where would this cash inflow be reported?

• Operating Activities

• Investing Activities

• Financing Activities

• It is not a cash flow item

Which of the following is considered a non-cash investing and financing activity?

• The payment of cash dividends

• The conversion of bonds to common stock

• The sale of a long-term asset for cash

• The purchase of inventory on credit

A decrease in a company's inventory balance, all else being equal, would lead to what adjustment under the indirect method?

• A deduction from operating income

• An addition to operating income

• A cash outflow from investing activities

• No adjustment is necessary