BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A:the statement of cash flows separates cash inflows and outflows into three major categories:operating, investing, and financing
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B:the ending cash balance shown on the statement of cash flows must agree with the amount shown on the balance sheet for the same fiscal period
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C:the total increase or decrease in cash shown on the statement of cash flows must agree with the “bottom line” (net income or net loss) reported on the income statement
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both A and B are true
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All of the above are true
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Detailed explanation-1: -Answer and Explanation: Correct statement: c) In the statement of cash flows, a decrease in inventories is reported as a source of cash.
Detailed explanation-2: -Answer: d. The indirect method and the direct method will produce the same amount of net cash flow from operating activities.
Detailed explanation-3: -A cash flow statement is a valuable measure of strength, profitability, and the long-term future outlook of a company. The CFS can help determine whether a company has enough liquidity or cash to pay its expenses. A company can use a CFS to predict future cash flow, which helps with budgeting matters.
Detailed explanation-4: -Answer and Explanation: Option d is the correct answer. A cash flow statement shows financial transactions of various nature that involve cash exchange, so it provides information about the ability of a business to generate future cash flows.