Short Essay Questions 1.How is the statement of cash flows linked to the balance sheet? 2.How do 'cash equivalents' fit into the statement of cash flows? 3.How does the direct method of...

Short Essay Questions

1.How is the statement of cash flows linked to the balance sheet?

2.How do 'cash equivalents' fit into the statement of cash flows?

3.How does the direct method of preparing the statement of cash flows differ from the indirect method?

4.In the operating activities section of a statement of cash flows prepared using the indirect method certain items are added to net income. Why is depreciation added?

5.In the operating activities section of a statement of cash flows prepared using the indirect method certain items are added to, or subtracted from, net income. Why are changes in current accounts added or subtracted?

6.The international financial reporting standards are requiring a statement of cash flows. Why is this and what are some of the unique issues that multinational companies must understand when interpreting these statements?