Questions concerning a statement of cash flows
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1) If a firm issues $10 million in common stock and invests the proceeds in marketable securities, all of the following balance sheet categories will increase, except:
a) total assets
b) total liabilities
c) stockholder's equity
d) current assets
2) Which of the following accounts are included when calculating a firm's working capital?
I. accounts payable
II. accounts receivable
III. fixed assets
IV. Inventory
a) I and II only
b) I and III only
c) II and IV only
d) I, II, and IV only
e) II, III, and IV only
3) All else being equal, if a firm issues $100 million in 10% bonds and uses the proceeds to repurchase common stock that pays dividends of $10 million per year, all of the following will occur, except:
a) income taxes will decrease
b) interest expense will increase
c) net income will decrease
d) net cash available for other needs will decrease
4) A Statement of Cash Flows can be used to answer a variety of questions. Which of the following would this statement not be likely to answer?
a) Did we borrow any money?
b) Why did our cash balance increase or decrease?
c) What is the current level of inventory?
d) Did we issue any dividends?
5) On a Statement of Cash Flows, which of the following represents cash flows from the income statement?
a) funds provided by operations
b)f unds provided by investing activities
c) funds provided by the sale of assets
d) funds provided by financing activities
e) the change in the cash balance
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