13.4 Learning Objective 13-4
1) On the statement of cash flows of a healthy company, Net Cash Provided by Operating Activities is generally less than net income.
2) If the sale of plant assets is a company's major source of cash, it may be a sign of financial difficulty.
3) On the statement of cash flows of a healthy company, Net Cash Provided by Operating Activities generally exceeds net income because depreciation expense is added back to net income.
4) In the statement of cash flows, sales of marketable securities are considered an operating activity.
5) In the statement of cash flows, purchases of fixed assets are considered to be investing activities.
6) In the statement of cash flows, more purchases of long-term assets than sales of long-term assets are considered a sign of a healthy company.
7) Analyzing the statement of cash flows may help analysts determine the financial health of a company. Which of the following signs below is NOT an indicator of a financially healthy company?
A) The company's operations are a major source (not a use) of cash.
B) The company's operations result in Net Cash Used by Operating Activities.
C) The company's investing activities include more purchases than sales of long-term assets.
D) The company's financing activities are not dominated by borrowing.
8) On a statement of cash flows of a healthy company, net income would ordinarily be:
A) less than depreciation expense.
B) more than depreciation expense.
C) greater than Net Cash Provided by Operating Activities.
D) less than Net Cash Provided by Operating Activities.
9) On a statement of cash flows(indirect method), which item is reported as a line item under Cash From Operating Activities?
A) Sale of securities
B) Purchase of fixed assets
C) Purchase of securities
D) Amortization Expense
10) On a statement of cash flows, which is considered an investing activity?
A) Depreciation expense
B) Increase in inventory
C) Sale of securities
D) Repayment of debt