Learning Module 5 Analyzing Statements of Cash Flows II

Which of the following best describes the first step analysts should take when evaluating a company's statement of cash flows?

If a company reports revenue of 100 million and accounts receivable increase by 8 million in the year, what is cash received from customers for that year?

A firm's cost of goods sold is 80 million. Inventory decreased by 5 million and accounts payable decreased by 2 million. What is cash paid to suppliers?

Which adjustment is added to net income when converting to operating cash flow under the indirect method?

A company reports net income 5,000, depreciation 800, gain on sale of equipment 200, increase in accounts receivable 300, increase in accounts payable 150. What is net cash provided by operating activities using the indirect method?

When preparing a common-size cash flow statement using the total inflows/total outflows approach, how are operating cash outflows presented?

Which common-size approach is most useful for forecasting cash flows that scale directly with revenue?

Which formula correctly computes free cash flow to the firm (FCFF) starting from cash flow from operations (CFO) when interest paid is included in CFO under the company's reporting?

A company has CFO of 400, interest paid 50, tax rate 30 percent, and capital expenditures (FCInv) of 120. Using the FCFF formula from CFO, what is FCFF?

Which statement about FCFE is correct?

A firm has CFO of 1,200, capital expenditures 500, and repays debt of 300 (no new borrowing). What is FCFE?

Which ratio is most useful to evaluate a company's ability to pay dividends from operating cash flows?

A company's operating cash flow is 600, interest paid is 60, taxes paid is 100. What is the cash-based interest coverage ratio defined as (CFO + Interest paid + Taxes paid) ÷ Interest paid?

When converting an indirect cash flow statement to an approximate direct format, which of the following is the least useful source of information?

Which of these items can be classified differently under IFRS versus US GAAP and therefore should be checked when comparing CFO across firms?

Which of the following is a correct interpretation if a mature company’s operating cash flow consistently exceeds net income?

Company A shows a positive operating cash flow but consistently negative free cash flow to the firm (FCFF). Which is the most likely explanation?

Which ratio would you use to evaluate whether operating cash flows are sufficient to fund capital expenditures?

Company X had net income 200, depreciation 40, increase in AR 20, increase in inventory 30, increase in AP 15. Using indirect method, what is CFO?

Which of the following best describes how an increase in prepaid expenses during the year affects cash paid for operating expenses when converting to the direct method?

Which cash flow category typically includes proceeds from the sale of investments in marketable securities?

A company sold equipment with a book value of 200 for proceeds of 350. How should the gain be treated when preparing the statement of cash flows under the indirect method?

Which of the following best captures the effect of classifying interest paid as financing instead of operating under IFRS when comparing two firms?

When converting an indirect cash flow statement to the direct format, the change in which account would increase 'cash paid to employees' when salary expense is given?

Which of the following is a coverage ratio that measures a company's ability to pay its long-term debt from operating cash flows?

Which of the following statements about the common-size inflows/outflows approach is true?

A firm's cash flow statement using the indirect method shows a gain on sale of equipment of 120 and cash proceeds of 400 in investing activities. Which of the following entries are needed in the operating and investing sections respectively when preparing the indirect method?

Which of the following is the best way to approximate cash paid for income taxes using financial statement information when preparing the direct cash flow format?

Company Y reports CFO of 300 and pays dividends of 150. The company also uses 80 of cash for investing and financing outflows. Which ratio assesses the company's ability to cover investing and financing outflows from operating cash flows?

If accounts receivable decreased by 10 and revenue decreased by 6 in a period, what happened to cash received from customers compared to prior period's revenue (qualitatively)?

Which statement regarding common-size cash flow statements is correct?

A company's accounts payable decreased by 20 during the year. Assuming purchases equal 500, how much cash was paid to suppliers?

Which of the following cash flows is classified as financing activity under US GAAP?

A company reports revenue 1,000, COGS 600, inventory increased by 20, accounts payable increased by 10. What is purchases from suppliers?

Which of the following adjustments would you make to net income under the indirect method when the company records an increase in other accrued liabilities of 25?

Which of the following best describes the primary analytical use of free cash flow measures?

In the common-size net revenue approach, an item shown as -3.00% indicates what when net revenue is 1,000?

When using the direct method reconstructed from indirect data, which of these is a typical sign that more detailed footnote data is required to improve accuracy?

Which of the following is most likely to increase FCFE, holding other items constant?

Which cash flow item is most directly affected by changes in the company's dividend policy?

Which of the following adjustments would an analyst make to reported CFO if the company reports interest paid in financing activities under IFRS but you want FCFF computed consistently?

Which of the following is true about the relationship between net income, depreciation, and CFO for a mature firm?

Company Z's CFO is 900, purchases of equipment are 1,100, proceeds from sale of equipment are 200. What is net cash used for investing activities?

Which of the following is an advantage of preparing a direct-format operating cash flow when available?

In a common-size cash flow (net revenue approach), depreciation expense is shown as 4.5 percent of net revenue of 2,000. What is depreciation expense in cash terms?

Which of these is most important to check when comparing a company's CFO across years before drawing conclusions about trend?

When would an analyst add back a gain on sale of an asset during the indirect reconciliation of CFO?

A company reports net income of 500 and reports an increase in deferred tax liability of 40. Under the indirect method, how should this change be treated in reconciling to CFO?

Which of these best explains why an analyst might prefer direct-format operating cash flow when available?

In the three-step conversion from indirect to direct, which step removes non-operating and non-cash items?