True / False Questions
1. The primary purpose of the statement of cash flows is to report all major cash receipts (inflows) and cash payments (outflows) during a period.
2. To be classified as a cash equivalent, an investment must be readily convertible to an unknown amount of cash because the market value may be affected by interest rate changes.
3. The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.
4. Cash flow information can assist internal users in planning day-to-day operating activities.
5. A cash equivalent must be readily convertible to a known amount of cash and must be sufficiently close to its maturity so its market value is unaffected by interest rate changes.
6. Business activities that either generate or use cash are classified as operating, investing, or financing activities on the statement of cash flows.
7. Financing activities include the purchase and sale of long-term assets.
8. Both cash dividends received and interest received are considered to be investing inflows.
9. The payment of cash dividends to shareholders is classified as a financing activity.
10. The full disclosure principle requires that noncash investing and financing activities be disclosed as part of the statement of cash flows.