QUESTION DESCRIPTION:

True or False

1.__A profitable firm can never run out of cash.

2.__Using the accrual basis of accounting to measure net income creates the need for a separate financial statement that reports the impact of operations on cash flows.

3 __Depreciation charges provide cash to the firm because the indirect method adds depreciation expense to net income to calculate cash provided by operations.        

4.__To prepare the statement of cash flows requires analyzing changes in balance sheet accounts during the accounting period.  As an outcome of correct double-entry recording of all transactions, the net change in cash will equal the net change in all noncash accounts.

5.__Under U.S. GAAP, the statement of cash flows classifies cash expenditures for interest on debt as an operating activity but classifies cash expenditures for dividends to shareholders as a financing activity.

6.__The acquisition of equipment by assuming a mortgage is a transaction that firms cannot report in their statement of cash flows but must report in a supplemental schedule or note.

7.__On the statement of cash flows, the issuance of capital stock for cash to be used for future expansion of a production facility is treated as a/an investing activity.

8.___The statement of cash flows helps the reader judge a firm’s cash flow needs and how a firm has dealt with them.

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SUBJECTS / CATEGORIES:
1. Finance
2. Financial Management
3. Accounting
4. Corporate Finance