Learning Objective 9-8
1) In general, investors and analysts prefer most to see ________.
A) positive cash from operating activities
B) negative cash from operating activities
C) positive cash from investing activities
D) positive cash from financing activities
2) If a company were to manipulate the statement of cash flows to please analysts, it would most likely report cash paid ________.
A) for operating expenses as capital expenditures
B) for capital expenditures as operating expenses
C) for repayment of loans as capital expenditures
D) for repayment of loans as operating expenses
3) If a company were to manipulate the statement of cash flows to please analysts, it would most likely report cash received ________.
A) from the sale of stock as cash from the sale of intangible assets
B) from the sale of intangible assets as cash from the sale of capital assets
C) from loans as cash collected from customers
D) from the sale of land as cash received from the issuance of stock
4) Investors use the statement of cash flows in order to determine whether a company has positive cash flows from operating activities.
5) Investors should be aware that management may unethically misclassify cash from the sale of land as cash from customers in order to look better.
6) Misclassifying cash from long-term borrowings as cash collected from customers will make the cash from investing activities higher than it should.
7) It is considered proper and ethical to classify cash paid for interest as a financing activity on the statement of cash flows.
8) Krupt, Inc., an international company, classified cash transferred to Krupt from its subsidiaries in foreign countries as cash collected from customers on its statement of cash flows. The subsidiaries classified the same cash transferred to Krupt, Inc., the parent company, as payment of long-term debt on their statements of cash flows. Which sections of the consolidated statement of cash flows (both the parent and its subsidiaries combined) will be affected and how? Does this classification of cash seem ethical?
9) At the end of the year, Krupt, Inc. added the payroll checks that were distributed to employees but had not yet cleared the bank back to its Cash account. Which sections of the statement of cash flows will be affected and how? Does this treatment seem ethical?