Final For Acc240

Front 1

What does the statement of Cash flows (SCF) explain

Back 1

It explains the changes in a company's cash balance during the fiscal period and the causes of those changes

Front 2

Why is the SCF important?

Back 2

-Capacity to meet obligations for cash
-ability to generate cash flows in the future
-effectiveness in implementing investing & financing strategies
-success in productively managing investing activities
-future external financing needs
-helps analyze solvency (NOT PROFITABILITY)

Front 3

What statements helps aalyze profitability?

Back 3

Income Statement

Front 4

What statement helps analyze solvency

Back 4

SCF

Front 5

What are the three cash flow activities?

Back 5

OPeratin, investing and financing

Front 6

What is the indirect format of the SCF

Back 6

The indirect format reconciles net incomeon an accrual basis with cash flow from operating activities on a acash basis
(Investing and financing sections are the same on indirect and direct format)

Front 7

What is the difference between the direct format and indirect format for the SCF

Back 7

The indirect and direct formats have different operatig sections.

Front 8

SCF operating section format

Back 8

1. Begins with Net income/Loss
2.Analysis of the Income Statement, non-cash expenses (depreciation and amoritization)
3. Analysis of the balance sheet, (Current Assets AND current liabilities)

Front 9

Investing section of the SCF

Back 9

Analysis of longterm assets (Buying or selling)

Front 10

Financing Section of the SCF

Back 10

-Analysis of long-term liabilities and Stockholder's equity
(external financing and debt and equity transactios)
(Interest on debt is a part of the operating activities)

Front 11

What financial statement do you need to perepare the SCF

Back 11

I/S + SSE + B/S

Front 12

Operating activities

Back 12

Its primary purpose is to be a source of cash

Front 13

Investing activities primary purpose

Back 13

To be a use of cash (Buy PP&E, oter investments)

Front 14

Financing activities primary purpose

Back 14

To be a source of cash (Borrow money, sell stock)

Front 15

How can A/R analysis identify earnings quality issues?

Back 15

Sales, Gross A/R and Allowance GR not all moving in the same direction or the movement is not proportional

Front 16

Earnings Quality Depreciation

Back 16

- How long you decide the life of the asset is
- The depreciation method

Front 17

Earnings Quality Restructuring

Back 17

-Restructuring charges along multiple years
- Reversing the restructuring charges

Front 18

Earnings Quality Reserves

Back 18

Put money away while times are good, pull when times are bad

Front 19

Financial Reporting quality (notes)

Back 19

-Lack of disclosure in the notes
-Line item whose amount is "netted"

Front 20

Financial Reporting quality (B/S)

Back 20

Balance Sheet data that should be assessed
-C/L vs C/A (debt/asset managing)
-Contingencies and Commitments not on the face of the B/S but in the Notes
-Off-balance sheet financing -opeating leases

Front 21

Financial Reporting quality (I/S)

Back 21

I/S data that is not presented in utli step format

Front 22

Financial Reporting quality (SCF)

Back 22

Significant changes in CA nad CL
-Sell A/R, get cash, increase CFO
-Delay A/P Payments, increases CFO

Front 23

Segment Data (why)

Back 23

Identifies areas of strength and weekness
- contributions to revenue and operating profit by segementing
-Business and geographical

Front 24

What does a large operating cash flow realtive to NI ususally inidicate

Back 24

Good financial performance

Front 25

What does the cash flow from operating activities normally apprx. = to

Back 25

Cash flow from Investing plus cash flow from financing

Front 26

DO you ahve an obligation to repay Equity financing or debt financing

Back 26

Equity financing= no
Debt financing= yes

Front 27

Is interest expense deductible?

Back 27

Yes for net income purposes

Front 28

Are dividends deductible?

Back 28

No

Front 29

What is profitability based on?

Back 29

Accrual basis

Front 30

What is solvency based on?

Back 30

Cash basis

Front 31

Outstanding shares

Back 31

Shares sold - shares repurchased

Front 32

Which of these represents a cash inflow from the investing section fo the Statement of Cash Flows
a. The company sold their own common stock
b. The company borrowed money from a bank
c. The comapy sold securities held for investment
d. The company purchased equipment to use in the business

Back 32

Answer is C the company sold securities held for investment

Front 33

Do publicly held companies have to report BAsic EPS on the Income Statement?

Back 33

Yes

Front 34

Does the Statement of Cash Flows include repayment of debt principal?

Back 34

No

Front 35

How do you calculate RE?

Back 35

NI- dividends

Front 36

Why is diluted EPS typically higher than Basic EPS?

Back 36

Because of the effect of convertible securities, stock options and/or warrants that dillute the diluted EPS

Front 37

What does it mean if a companies FL = 1.0

Back 37

It means they have afinanced all of their assets with equity

Front 38

On a common size income statement how would you calculate provision for taxes common size?

Back 38

Provision for taxes over net income BEFORE taxes

Front 39

If a new delivery truck was purchased for 18000 and half was paid in cash and half was on credit how is the accounting equation affected?

Back 39

Assets-=increase
Laibilities=increase
SE=no change

Front 40

Where do you find information about a companies retained earnings?

Back 40

Balance Sheet and SSE

Front 41

If a sporting goods store sold 36000 worth of merchandise and 70% was collected in cash. The merchandise originally cost the store 20000 how many different accounts were affected?

Back 41

Five

Front 42

The primary accounting principle/assumption associated with preparing financial statements on a regular basis is the matching principle

Back 42

False