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Exam 11: Statement of Cash Flows

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Question 71

Multiple Choice

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The balance sheet of Tech Track reports total assets of $400,000 and $500,000 at the beginning and end of the year,respectively.Sales revenues are $1.1 million ($0.8 million in the previous year) ,net income is $40,000,and net cash flows from operating activities are $50,000.How does Tech Track's cash return on assets compare to the industry average of 10%?

A) Better.
B) Worse.
C) Same as.
D) Cannot be determined with the data provided.

E) A) and B)
F) A) and C)

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Question 72

Multiple Choice

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The indirect and direct methods:

A) Are used by companies about equally in actual practice.
B) Affect the presentations of operating,investing,and financing activities.
C) Arrive at different amounts for net cash flows from operating activities.
D) Are two allowable methods to present operating activities in the statement of cash flows.

E) A) and B)
F) C) and D)

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Question 73

True/False

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Cash return on assets can be separated to examine two important business strategies: cash flow to sales and asset turnover.

We record dividends paid as a financing activity.

Cash flows from investing activities do not include:

Investing activities include cash transactions involving the purchase and sale of long-term assets and current investments.

Two competitors in the construction supply industry report the following selected financial data: Calculate the cash return on assets,cash flow to sales ratio,and asset turnover ratio for each company.Which company has the better cash flow to sales ratio and which company has the better asset turnover ratio?

Micro Manufacturing reports net income of $850,000.Depreciation Expense is $60,000,Accounts Receivable increases $30,000 and Accounts Payable decreases $10,000.Calculate net cash flows from operating activities using the indirect method.

A loss on the sale of long-term assets is added to net income to arrive at net cash flows from operating activities under the indirect method.

Mary's Music Store reported net income of $135,000.Beginning balances in Accounts Receivable and Accounts Payable were $29,000 and $26,000,respectively.Ending balances in these accounts were $30,000 and $24,000,respectively.Assuming that all relevant information has been presented,Mary's cash flows from operating activities would be:

Cash return on assets indicates the amount of operating cash flow generated for each dollar invested in assets.

Which one of the following is correct about the statement of cash flows?

Operating cash flows exclude:

Explain the difference in the calculation of return on assets and cash return on assets.How can cash-based ratios supplement the analysis of ratios based on income statement and balance sheet information?

_________ is an investing cash flow and ________ is a financing cash flow,as reported on the Statement of Cash Flows.

Data Solutions reports sales of $100 million.Accounts receivable at the beginning and end of the year are $6 million and $9 million,respectively.What is the amount of cash received from customers?

Which of the following items is not reported in the operating section of the statement of cash flows using the direct method?

Distinguish between the indirect method and the direct method for reporting net cash flows from operating activities.Which method is more common in practice? Which method provides a more logical presentation of cash flows?

If accounts receivable decreases,this indicates that revenues exceed cash receipts from customers.

The balance sheet of Tech Track reports total assets of $400,000 and $500,000 at the beginning and end of the year,respectively.Sales revenues are $1.1 million ($0.8 million in the previous year) ,net income is $40,000,and net cash flows from operating activities are $50,000.How does Tech Track's cash flow to sales ratio compare to the industry average of 5%?