FINANCIAL STATEMENT REVIEW AND CASH FLOW QUIZ

1.    When calculating the net cash flow, which of the following is true?

1. we subtract non-cash charges from net income

2. we add non-cash charges to the net income

3. we do not include non-cash charges in our calculation

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  • Correct answer is 'b'

2.    Which of the following statements is (are) true?

1. a decrease in accounts receivables generates cash flow

2. an increase in accounts receivables generates cash flow

3. a decrease in inventory generates cash flow

4. an increase in inventory generates cash flow

5. none of the above

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  • Correct answers are both 'a' and 'c''

3.    Accounting profits are a better measure than cash flow of how the firm is doing.

1. true

2. false

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  • Correct answer is 'b'

4.    Profits is not an appropriate standard to measure the performance of the firm because ___.

1. accounting profits can be manipulated

2. there are different definitions of accounting profit

3. maturing financial obligations are met with cash, not profits

4. a and b are both correct

5. a, b, and c are all correct

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  • Correct answer is 'e'

5.    When making financial decisions we want to focus on _____.

1. accounting profits 

2. net cash flows

3. incremental cash flows

4. after tax cash flows

5. incremental after tax cash flows

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  • Correct answer is 'e' - this is the BEST answer.

These study questions only cover the online class notes.  You should also be able to answer any of the assigned discussion questions and problems in the text book assignments.

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