21. A cash-based measure that is used to help business decision makers estimate the amount and timing of cash flows is the cash flow on total assets ratio.
22. The cash flow on total assets ratio can be used as an indicator of earnings quality.
23. Cash flow amounts and their timing should be examined when planning and analyzing operating activities.
24. The cash flow on total assets ratio is defined as the total cash flows from operations divided by the average total assets.
25. The cash flow on total assets ratio is defined as average total assets divided by operating income.
26. The cash flow on total assets ratio reflects the company’s actual cash flows and, therefore, is affected by the accounting constraints of recognition and measurement for net income.
27. The usual first step in preparing the statement of cash flows is computing the net increase or net decrease in cash.
28. Noncash financing activities are disclosed in a note in the financing section of the statement of cash flows.
29. Cash paid out for merchandise is considered to be an operating activity.
30. The purchase of stock in another company is considered to be a financing activity.