在会计书上看到一句，the main difference between the accounts payable and the accrued liabilities_百度知道
在会计书上看到一句，the main difference between the accounts payable and the accrued liabilities
这句话怎么翻译the main difference between the accounts payable and the accrued liabilities&#47！！！谢谢;expenses is that these liabilites are typically not documented，并求解释
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付账款是指企业在商品交易中按双方合同约定预先支付的部分货款. 预提费用是指企业按照规定从成本费用中预先提取但尚未支付的费用.是资产类账户.是负债类账户
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understanding
cash flow statements(Reading 27)
Exercise Problems:
A firm sells 20-year bond at a premium. Relative to a bond issued at par, the
cumulative effect over the first two years on cash flow from financing
activities (CFF) and cash flow from operations (CFO) (assuming that cash paid
for interest is reported in CFO) will be:
Overstated
Overstated
Understated
Overstated
Overstated
Understated
expense=market rate at issue * bond liability
liability with a discount premium is more than that with a par bond, interest
expense in all years will be more than with a par bond. Therefore, assuming
that cash paid for interest is reported in CFO, CFO with premium bond
will be understated.
On the other hand, CFF with premium bonds will be overstated
relative to CFF with par bonds. At issue date, CFF will be higher
since more cash is received. Subsequent to issuance, there is no additional
CFF effect. Thus, the total CFF in the first two years will be higher
due to issuance premium.
Compared to a firm that appropriately expenses recurring maintenance costs, a
firm that capitalizes these costs will most likely have cash flow from
operations (CFO) that are:
C. The same
Capitalizing
costs takes them out of expenses, which results in increased CFO and will be
subtracted from Cash Flow from Investments. So CFO will be higher.
Under IFRS, interest paid and dividends paid can be categorized as either:
Operating or financing section of the cash flow statement.
Operating or investing section of the cash flow statement.
Investing or financing section of the cash flow statement.
The following
table indicates the cash flow classification differences between U.S.GAAP and
Transaction
CFO/CFI/CFF
Huskie Company reported the following amounts on its most recent financial
statements:
receivable, net
Merchandise
Accounts payable
$6,500,000
$7,200,000
Cost of goods
paid to suppliers during 20x4 is closet to:
$4,180,000
$4,620,000
C. $4,675,000
paid to suppliers is calculated as:
paid to suppliers
=COGS+?Inventory-
?Accounts payable
=$4,400,000+(740,000-520,000)-(320,000-375,000)
=$4,675,000
5. Selected information
from a company’s comparative income statements and balance sheets is
presented below.
Selected Income Statement Data
for the year ended August 31st
(US$ thousands)
Sales revenue
Cost of goods sold
Depreciation expense
Net income
Selected Balance Sheet Data
as of August 31st
(US$ thousands)
Current assets
Cash & investments
receivable
Inventories
Total current assets
Accounts payable
Other current liabilities
Total current liabilities
collected from customers in 2011 is closest to:
A. $88,500.
B. $96,100.
C. $111,500.
collected from customers
Revenues – Increase in accounts receivable
$100,000 – (25,000 – 13,500)
6. Selected
data for a company is presented below:
sheet data
Accounts receivable
Accounts payable
Accrued liabilities
statement data
Cost of goods sold
Selling general & administrative expenses
The company’s
cash conversion cycle for 20x3 is closest to:
A. 58 days.
B. 100 days.
C. 104 days.
conversion cycle measures the average time between the outlay of cash to
purchase inventory and the cash recovery from collecting accounts receivable.
The cash conversion cysle is calculated using the following formulas:
conversion cycle=days of inventory on hand (DOH)
+das of sales
outstanding (DSO)
&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&
-number of days of payables
DOH=365/()=365/()=81.1
DSO=365/()=365/()=76.1
Number of days
of payable=365/ ()
&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&
=365/()=53.1
*purchases=ending
inventory – beginning inventory + COGS
&&&&&&&&&&&&&&&&&&&&&
=$275-201+1,071 =1,145
NOTE: it is
preferable to use Purchases rather tan COGS to calculate days of payables, if
it is available or can be calculated.
conversion cycle= 81.1 +76.1 – 53.1 =104
incorrect. This choice was probably derived by incorrectly subtracting DSO
and adding the number of days of payables in calculating the cash conversion
B is incorrect. This choice is derived by incorrectly calculating
the number of days of payables using the COGS rather than inventory
purchase. Purchasing should be used when it can be derived from the
available data.
7. Under U.S. GAAP,
interest paid is most likely included in which of the following cash
flow activities?
A. Operating only
B. Financing only
C. Either operating or
The following
table indicates the cash flow classification differences between U.S.GAAP and
Transaction
CFO/CFI/CFF
overdrafts
*under IFRS, bank overdrafts are considered part of cash
equivalents and are not reported on the cash flow statement.
following items are from a company’s cash flow statement.
Classification of cash flow
Description
Amount (￡000s)
Operating activities
Cash received from customers
Investing activities
Interest and dividends received
Financing activities
Net repayment of revolving credit loan
Which of the following
standards and formats did the company most likely use in the
preparation of its financial statements?
A. IFRS, direct format
B. IFRS, indirect format
C. Either IFRS or U.S.
GAAP, direct format
The direct
method of cash flow statement presentation shows the specific cash inflows
and outflows that result in reported cash flow from operating activities
(cash from customers, cash to suppliers, etc.). Companies using IFRS can
decide to report interest and dividend receipts as either an investing or
operating activity, whereas under U.S. GAAP, they must report such income as
an operating activity. The listed operating and investment activities
indicate that the company reports under IFRS, using the direct method.
Which of the following is least likely a benefit of the direct method
for reporting cash flow from operating activities? Compared with the indirect
method, the direct method provides:
A. supplementary data
under U.S. GAAP.
B. details on the specific
sources of operating receipts and payments.
C. insight on differences
between net income and operating cash flows.
direct method, cash flow from operations accumulates cash received from
customers, cash paid to suppliers, cash paid to employees, cash paid for
interest, etc. This method provides specific detail on a firm’s operating
cash receipts and cash payments for a given reporting period, while
eliminating the effects of accrual accounting. It provides supplementary data under U.S. GAAP.
Providing insight on the differences between net income
and cash flow is a benefit of the indirect method. The indirect method
starts with net income and integrates a series of adjustments to calculate
cash flow from operations.
A firm reported the following financial statement items:
Net income
Non-cash charges
Interest expense
expenditure
Working capital
expenditures
Net borrowing
The free cash flow to the
firm is closest to:
A. EUR2,110.
B. EUR2,470.
C. EUR2,590.
Cash Flow Item
Amount (EUR)
Net income
Plus non-cash
Plus interest
expense (1 – Tax rate)
300 (1 – 0.40)
Less capital
expenditure
Less working
capital expenditures
Which of the following statements is most accurate regarding cash flow
statements prepared under IFRS and U.S. GAAP?
A. Under U.S. GAAP, bank
overdrafts should be classified as a financing cash flow.
B. Under IFRS, interest
paid can be reported either as an operating or an investing cash flow.
C. Both the direct and
indirect formats of cash flow statements are allowed under IFRS and U.S.
GAAP, but indirect is encouraged under IFRS only.
Under U.S.
GAAP, bank overdrafts are not considered part of cash and cash equivalents
and are classified as financing cash flows.
The following
table indicates the cash flow classification differences between U.S.GAAP and
Transaction
CFO/CFI/CFF
overdrafts
*under IFRS, bank overdrafts are considered part of cash
equivalents and are not reported on the cash flow statement.
The following is selected data from a company’s operations:
Net Income
Increase in
Accounts receivable
Increase in
Accounts payable
Depreciation and
amortization
The cash flow from
operations is closest to:
A. $89,000.
B. $105,000.
C. $111,000.
Net Income
plus Depreciation
& Amortization
less Increase in
Accounts Receivable
plus Increase in
Accounts Payable
Net Cash from
Operations
A company reports its interest payments on long-term debt as a financing
activity under IFRS. If the company reports under U.S. GAAP, the most
likely effect would be:
an increase in cash flow from operations.
a decrease in cash flow from investing activities.
an increase in cash flow from financing activities.
payments can be reported either as operating or financing cash flow under
IFRS, but can only be reported as operating cash flow under U.S. GAAP. The
interest payment was originally reported as financing activity under IFRS,
but under U.S. GAAP, it would be an operating activity. Therefore, cash flow
from financing activities would increase, and operating cash flows decrease
by the same amount.
The following
table indicates the cash flow classification differences between U.S.GAAP and
Transaction
CFO/CFI/CFF
overdrafts
*under IFRS, bank overdrafts are considered part of cash
equivalents and are not reported on the cash flow statement.
The following information (in millions) on a company is available:
of goods sold
in total assets
in total liabilities
in inventory
in accounts payable
amount of cash (in millions) that the company paid to its suppliers is closest to:
of goods sold
Decrease in inventory
purchases from suppliers
Decrease in accounts payable
paid to suppliers
Which of the following statements is most accurate regarding cash flow
Interest coverage ratio is calculated as operating cash flow over interest
Debt payment ratio measures the firm’s ability to pay debts with operating
cash flows.
Reinvestment ratio measures the firm’s ability to acquire assets with
investing cash flows.
Debt payment
ratio measures the firm’s ability to satisfy long-term debt with operating
cash flow.
Debt payment=
A is incorrect.
The interest coverage ratio measures the firm’s ability to meet its interest
obligations.
coverage ratio=
interest paid was classified as a financing activity under IFRS, no interest
adjustment is necessary.
incorrect. The reinvestment ratio measures the firm’s ability to acquire
long-term assets with operating cash flow.
Reinvestment ratio=
A firm reports sales of EUR50,000,000 for the year ended December 31, 2009. Its
accounts receivable balances were EUR6,000,000 at January 1, 2009 and
EUR7,500,000 at December 31, 2009. The company’s cash collections from sales
(EUR) for 2009 is closest to:
A. 42,500,000.
B. 48,500,000.
C. 51,500,000.
collections from sales is equal to sales less the change in receivables:
EUR50,000,000 - (EUR7,500,000-EUR6,000,000) = EUR48,500,000.
A company issued shares to acquire a large tract of undeveloped land for
future development. The most likely recording of this transaction in
the cash flow statement is as a(n):
A. disclosure in a note or supplementary schedule.
B. outflow from investing activities, and an inflow from
financing activities.
C. outflow from operating activities, and an inflow from
financing activities.
transactions are not reported in the cash flow statement but if they are
significant they are reported in a note or supplementary schedule.
The following information is available about a company ($ millions):
ended 31 December
Net income
Cash flow from
operations
During 2011 the company most
likely decreased the:
A. proportion of sales
made on a cash basis.
B. inventory, anticipating
lower demand for its products in 2012.
C. proportion of interest-bearing debt relative to trade
accounts payable.
Sales, net income,
and net margin are relatively constant for the two years. The substantial
drop in cash flow from operations could be attributed to an increase in
receivables and/or inventory. A decrease in the proportion of cash sales
implies an increase in the proportion of credit sales, increasing accounts
receivable. An increase in accounts receivable would decrease cash flow from
operations.
A company accrued wages of $2,000 and collected accounts receivable of
$10,000. Which of the following best describes the effect of these two
transactions on the company?
A. Net income will increase
B. Current ratio will decrease
C. Cash from operations
will decrease
Accruing wages
increases current liabilities, but collecting receivables has no effect on
current assets therefore the current ratio decrease.
incorrect. Accruing wages increases expenses, but collecting receivables has
no effect on sales therefore the net income decrease.
C is incorrect. Collecting accounts receivable increases
cash flow from operations and accruing wages increases current liabilities,
which also increases cash flow from operations so cash from operations
will increase not decrease.
A company is buying back its stocks to offset the dilution of earnings from
its stock option program. Which of the following statements best describes
the effect on the financial statements of the amount spent to buy back the
stocks? The amount spent reduces:
A. net income.
B. cash from operating activities.
C. cash from financing
activities.
activities include cash flows that result from: borrowing or repaying debt
principal, issuing or repurchasing equity capital, and paying cash dividends.
The amount
spent to buy back stocks to offset dilution is classified as a financing
activity on the cash flow statement and therefore cash from financing
decreases.
A is incorrect. Net
income is&calculated by taking&revenues and&adjusting for the
cost of doing business, depreciation, interest, taxes and other expenses.
Buying back stock will not affect the net income.
is incorrect. Operating activities include cash flows from the sale
of a company’s goods/services, the cash impact of changes in operating
assets and liabilities, and adjustments for noncash items reported
on the income statement (using the indirect method).
If a company has a current ratio of 2.0, the effect of repaying $150,000 in
short-term borrowing will most likely decrease:
A. the current ratio, but
not the cash flow from operations.
B. the cash flow from
operations, but not the current ratio.
C. neither the current
ratio nor the cash flow from operations.
Financing activities include cash flows that
result from: borrowing or repaying debt principal, issuing or repurchasing
equity capital, and paying cash dividends. Operating
activities include cash flows from the sale of a company’s goods/services,
the cash impact of changes in operating assets and liabilities, and
adjustments for noncash items reported on the income statement (using the
indirect method).
The repayment
of short-term debt would reduce cash flow from financing, not cash flow from
operations.
Current ratio=
&Any time the current ratio is above 1, equal changes
in a current asset and a current liability will result in an increase
in the current ratio: if current assets = 550 and current liabilities
are 275, current ratio = 550/275 = 2.0. After the bank borrowing has
been paid, the ratio becomes (550-150)/(275-150) = 3.2. Had the ratio
initially been below 1, current assets = 250 and current liabilities
are 275, current ratio = 250/275 = 0.91, the equal change in current
assets and liabilities would decrease the current ratio: 100/125=0.80.
At the end of the year, a company sold equipment for $30,000 cash. The
company paid $110,000 for the equipment several years ago and had recorded
accumulated depreciation of $70,000 at the time of its sale. All else equal,
the equipment sale will result in the company’s cash flow from:
A. investing activities
increasing by $30,000.
B.& B. investing
activities decreasing by $10,000.
C.& C. operating
activities being $10,000 less than net income.
The book value
of the equipment at the time of sale is $110,000 - $70,000 = $40,000.
The proceeds are $30,000; therefore a loss of $10,000 is
reported on the income statement. The loss reduces net income, but
it is a non-cash amount, so is added back to net income in the calculation
of the cash from operations. Therefore, cash from operations is higher
than net income, not lower. The total amount of the proceeds, $30,000,
is the cash inflow from the transaction and is shown as a cash inflow
from investing activities.
analyst gathers the following annual information ($ millions) about a company
that pays no dividends and has no debt:
Net income
Depreciation
Loss on sale of
Decrease in
accounts receivable
Increase in
inventories
Increase in
accounts payable
expenditures
Proceeds from
sale of stock
The company’s annual free
cash flow to equity ($ millions) is closest to:
Free cash flow
to equity in a company without any debt is equal to cash flow from operations
(CFO) less capital expenditures.
net income
+ depreciation
+ loss on sale
of equipment
+ decrease in
accounts receivable
– increase in
inventories
+ increase in
accounts payable.
loss on sale of equipment is added back when calculating CFO. It would have
been deducted in the calculation of net income but the loss is not the cash
impact of the transaction (the proceeds received, if any, would be the cash
effect) and cash flows related to equipment transactions are investing
activities, not operating activities.
45.8 + 18.2 +1.6 + 4.2 – 3.4 +2.5 = $68.9 million
$68.9 – $7.3 = $61.6 million free cash flow to equity.
24. An analyst gathers the following
information about three equipment sales that a
company made
at the end of the year:
Accumulated
Depreciation
Date of Sale
All else equal for that year, the
company’s cash flow from operations will most likely be:
A. the same as net income.
B. $40,000 less than net income
C. $140,000 less than net income.
value=Ori. Cost-Accu. Depre.
Gain=sales
proceed-BV
200-150=50
300-250=50
40-50=(10)
The net gain is $40,000. The amount
that would
be deducted from net income to
determine cash flow from operations is equal to the net gain of $40,000.
25. An analyst
has gathered the following information about a company:
$ millions
flow from operating activities (CFO)
flow from investing activities (CFI)
flow from financing activities (CFF)
changed in the cash for the year
paid (included in CFO)
paid (tax rate of 30%)
debt, end of year
The cash flow
debt coverage ratio for the year is closest to:
A.&&& 20.6%.
B.&&&& 23.7%.
C.&&&& 27.4%.
cash flow debt
coverage ratio
=CFO/Total
=105.9/512.8=20.6%
company has a current ratio of 2.0, that company’s repayment of $510,000 in
short-term borrowing obtained from a bank would most likely decrease:
A. current
ratio, but not cash flow from operations.
B. cash flow
from operations, but not current ratio.
C. neither current ratio nor cash flow from operations
The current
ratio is above 1.0, so the payment of short-term borrowing would increase the
it would reduce both the numerator ad denominator by the same
amount. The repayment of short-term debt would reduce cash flow from
financing, not cash flow from operations.
27. At the end
of the year, a company sold equipment for $30,000 cash. The company paid
$110,000 for the equipment several years ago and had accumulated depreciation
of $70,000 doe the equipment at the time of sale. All else equal, the
equipment sale will result in the company’s cash flow:
A. investing
activities decreasing by $10,000.
B. investing
activities increasing by $30,000.
C. operating
activities being $10,000 less than net income.
activities include cash flows that result from the purchase or sale of any
long-term assets, including fixed assets, long-term investments, and business
acquisitions.
amount of the proceeds ($30,000) would be shown as a cash inflow from
investing activities.
incorrect. The cash proceeds received from the sale of long-term assets
should be recorded as CFI.
A is incorrect. The book value of the equipment would been
$110,000-$70,000=$40,000 at the time of the sale, so a loss of $10,000
(=$30,000-40,000) for financial statement purposes would be realized.
The net loss would reduce net income and would be adjusted in the
statement of cash flow by adding the net loss to net income. So CFO
would be $10,000 more that net income.
27. In 2012, a
company reported net income of $130 million and cash flow from operations of
$120 million. All else equal, the most likely explanation for the difference
between net income and CFO in 2012 is that the company:
A. tightened
credit policies and increased collection efforts during the year.
B. purchased
new PP&E at the beginning of the year.
C. increased
raw material inventory in anticipation of increased sales at the end of the
The increase
in inventory (working capital investment) would reduce CFO relative to net
Reference:
question 23.
incorrect. This would increase CFO relative to net income.
B is incorrect. This would decrease CFI.
an analyst gathered the following annual information ($millions) about a
company that pays no dividends and has no debt:
Net income
Depreciation
Loss on sale of equipment
Decrease in AR
Increase in inventories
Increase in AP
Capital expenditures
Proceeds from sale of stock
company’s annual free cash flow to equity ($million) is closet to:
A.&&& 53.1.
B.&&&& 58.4.
C.&&&& 61.6.
FIFE=CFO-Capital
expenditures+/-net borrowing
=Net income +
depreciation + loss on sale of equipment +decrease in AR- increase in
inventories + increase in AP
=45.8+18.2+1.6+4.2-3.4+2.5
=$68.9million
FCFE=68.9-7.3=$61.6.
29. Financial
data for Woodview Corporation, a company that uses U.S.GAAP, are as follows:
Depreciation
expenditures
of equipment*
property and equipment
investments
*Cost basis of
equipment sold was $5,000.
information above, cash from operations and cash from financing activities
reported on the company’s statement of cash flows for 2012 would be closest to?
A.&&& $66,500
for CFO and $5,000 for CFF.
B.&&&& $65,000
for CFO and -$15,000 for CFF.
C.&&&& $66,500
for CFO and -$15,000 for CFF.
operating activities:
Depreciation
on sale of equipment*
cash from operating activities
*Loss on sale
of equipment
financing activities:
in long-term debt
cash from financing activities
30. Selected
financial data for Janko, Inc, for 2012 follow. Assume the company pays no
in thousands)
Investment
interest income
received on investments
expenditures
in other long-term assets
in long-term debt
U.S.GAAP, what is Janko’s cash outflow from investing activities for 2012?
A.&&& $3,030,000.
B.&&&& $3,014,000.
C.&&&& $2,970,000.
outflow from investing activities is:
expenditures
($3,000,000)
in other long-term assets
($3,030,000)
Note. Under
U.S.GAAP, interest received and paid and dividends received are reported in
operating activities.
31. A company
has the following changes and cash flows for 2012.
Depreciation
expenditures
stock issuance
debt issued
U.S.GAAP, what was its cash flow from financing activities in 2012?
A.&&& $220,000.
B.&&&& $300,000.
C.&&&& $320,000.
financing activities:
in long-term debt
in common stock
32. Which of
the items below are included in the calculation of both free cash flow to the
firm (FCFF) and free cash flow to equity (FCFE) if you start with CFO?
A. Interest
borrowing.
Capital expenditures.
FCFF and FCFE
are both calculated net of capital expenditures (FCInv) as indicated in the
following formulas:
FCFF = CFO +
INT (1-t) – FCInv
FCFE = CFO –
FCInv ±Net borrowing
incorrect. Interest payments are reflected in the calculation of FCFE as they
are already reflected in CFO (under U.S.GAAP). However, the after-tax cost of
interest is added back to CFO when calculating FCFF. Note: capital
expenditures are subtracted in calculating FCFF and FCFE, however, dividends
paid are not subtracted when calculating either FCFF or FCFE.
B is incorrect. Net borrowing is an addition in arriving
at FCFE, but is not included in the FCFF calculation.
33. Included
below are several financial line item excerpts from the 2012 financial
statements of a company reporting under IFRS:
statement items($000)
Depreciation
& amortization
on sale of assets
in earnings of affiliates
sheet related activity ($000)
in accounts receivable
in accounts payable
The company’s
cash flow from operations for 2012 was closest to ($000):
A.&&& $1,220.
B.&&&& $1,261.
C.&&&& $1,313.
The answer is
derived based on the following indirect method formula calculation:
Net income
+depreciation
& amortization
loss on sale of assets
in earnings of affiliates
decrease in accounts receivable
increase in accounts payable
flow from operations
34. How would
cash flows from operating activities (CFO), investing activities (CFI), and
financing activities (CFF) under U.S.GAAP and IFRS be affected by interest
received on investment?
U.S.GAAP CFO increases and Under IFRS CFO increases.
U.S.GAAP CFO increases and Under IFRS CFO or CFI increases.
C. Under U.S.GAAP CFO or CFI increases and Under IFRS CFO
increases.
U.S.GAAP, interest received is included in CFO. Under IAS GAAP, it can be
classified as either CFO or CFI.
Reference:
question 3.
following information is from a company’s 2012 financial statements ($
millions):
as of the year ended 31 December
receivable
The company
declared and paid cash dividends of $5 million in 2012 and recorded
depreciation expense in the amount of $25 million for 2012. Under U.S.GAAP,
the company’s 2012 cash flow from operations ($ million) was closest to:
B.&&&& 30.
C.&&&& 35.
The change in
retained earnings is $20 and dividends are paid from retained earnings. 2012
net income would equal the change in retained earnings plus dividends paid
during 2012. Depreciation expense would be added to net income and the
changes in balance sheet account would also be considered to determine cash
flow from operations.
+depreciation
in accounts receivable
increase in inventory
in accounts payable
flow from operations
36. On a cash
flow statement prepared using the indirect method, which of the following
would most likely increases the cash from investing activities?
A. Sale of a
long-term receivable.
B. Sale of
held-for-trading securities.
C. Securitization of accounts receivable.
The sale of a
long-term receivable would increase cash from
two activities mentioned are operating activities.
company chooses to capitalize an expenditure related to capital assets
instead of expensing it, ignoring taxes, the company will most likely report:
A. a lower
cash flow per share in that period.
B. a higher
earnings per share in future periods.
C. the same free cash flow to the firm in that period.
Example: Capitalizing delivery cost as opposed to expensing it.
FCFF=CFO + interest × (1– t)
– capital expenditures
capitalized, the amount capitalized increases capital expenditures and is
recorded as a cash outflow from investing activities.
will be higher by amount capitalized, i.e., the amount not expensed.
capital expenditures and CFO increase by the same amount, FCFF is unchanged.
incorrect. Since CFO would be higher, cash flow per share in that period would be higher.
is incorrect. Capitalizing an expenditure related to capital assets will lead
to an increase in the depreciation expense in future period. So the EPS in
future period will be lower since net income will be lower.
38. A company
recorded the following events in 2012:
of securities for trading purposes
from the sale of trading securities
from issuance of bonds
of 30% of the shares of an affiliated company
On the 2012
statement of cash flows, the company’s cash flow from investing activities
(in ‘000) is closest to:
A.&&& -$275.
B.&&&& -$215.
C.&&&& $285.
Only the cash flows for the purchase of the shares in an
affiliated company are cash from
therefore the
net amount is -$275,000. Cash flows from trading securities are operating
activities.
39. Selected
information for a company is provided below.
receivables
The company’s
cash conversion cycle (in days) is closest to:
B.&&&& 120.
C.&&&& 138.
Cash conversion cycle
= Days sales outstanding +
Days of inventory on hand – Days of payables
AR days in sales
Inventory days
on hand (DHO)
AP days in
=7.68times
=4.06times
=20.3times
conversion cycle = DSO + DOH – Days in Payables = 48 + 90 – 18 = 120 days
40. A cash
flow statement where the cash from operations was prepared under the direct
method will most likely contain which of the following account titles?
received from customers.
B. Increase in
accounts receivable.
received from accounts receivable collections.
The following
figure contains an example of a presentation of operating cash flow for Bao
Company using the direct method.
Bao Company
cash flow- direct method
For the year
ended December 31, 2012
collections from customers
paid to suppliers
paid for operating expenses
paid for interest
paid for taxes
The following
figure contains an example of a presentation of operating cash flow for Bao
Company using the indirect method.
Bao Company
cash flow- indirect method
For the year
ended December 31, 2012
Net income
Adjustments to reconcile net income to cash flow
provided by operating activities:
& Depreciation and amortization
& Deferred income taxes
& Increase in accounts receivables
& Increase in inventory
& Decrease in prepaid expenses
& Increase in accounts payable
& Increase in accrued liabilities
Operating cash flow
company’s financial statement data for the most recent year include the
following:
Depreciation
of machine
of company trucks
of common stock
in accounts receivable
in inventory
in accounts payable
in wages payable
Based only on
these items, cash flow from financing activities is closest to:
of common stock
cash flows
42. An analyst
gather the following information about a company:
of plant and equipment
Depreciation
and amortization
The company
has a tax rate of 35% and prepares its financial statements under U.S.GAAP.
The company’s
free cash flow to the firm (FCFF) is closest to:
interest expense net of tax – net capital expenditures
$800+80x(1-0.35)-40+30
Depreciation
and amortization do not have to be added when calculating FCFF from CFO. They
are added when calculating FIFF from net income.
income+ noncash charges + interest expense x (1-tax rate)- fixed capital
investment – working capital investment
43. For which
of the following balance sheet items is a change in market value most likely
to affect net income?
securities issued by the firm.
securities that the firm intends to hold until maturity.
C. Securities held with the intent to profit over the short
Securities
held with the intent to profit over the short term are classified as trading
securities, and the changes in their market values are reflected in their
balance sheet values and also reported on the income statement.
A and B are incorrect. Debt securities issued by the firm,
and debt securities that the firm intends to hold until maturity,
are both reported at amortized cost, not market value. Debt and equity
securities that the firm does not except to hold to maturity or to
sell in the near term are marked to market on the balance sheet, but
unrealized gains and losses do not affect the income statement.
44. An analyst
gathers the following information:
in accounts receivable
Depreciation
in inventory
in accounts payable
in wages payable
in deferred taxes
of fixed assets
of fixed assets
from the sale of fixed assets
of new common stock
Based on the
above information, the company’s cash flow from operations under U.S.GAAP is:
Net income
Adjustments for noncash and nonoperating items:
& Depreciation
& Increase in deferred income taxes
& Profit from sale of equipment
Adjustment for working capital items
& Decrease in accounts receivables
&&&&&&&&&&&&&&&&&
& Increase in inventory
& Increase in accounts payable
& Decrease in wages payable
Operating cash flow
Dividends paid
are CFF, not CFO.
45. Which of
the following statements about cash flow is least accurate?
U.S.GAAP, cash flow from:
A. Operations
includes cash operating expenses and changes in working capital accounts.
B. Financing
includes the proceeds of debt issued and from the sale of the company’s
common stock.
C. Investing includes interest income from investment in
debt securities.
income is considered an operating cash flow under U.S.GAAP.
46. An analyst
gathered the following data about a company:
Collections
for customers
Depreciation
expenses (including taxes)
cash increased
If inventory
increases over the period by $800, cash flow from operations equals:
A. $1,600.
B. $2,400.
C. $3,000.
Use the direct
Collections
from customers
flow from operations
Cash expenses
are given. If you had been given COGS, you would need to adjust that for
inventory changes to get cash expenses for inputs. Depreciation is a non-cash
Changes in
depreciation are used with the indirect method. Net change in cash will
reflect CFI and CFF, not just CFO.
47. Which of
the following statements about the indirect method of calculating cash flow
from operations is least accurate?
Depreciation is added back to net income because it is an expense not
requiring cash.
adjustment is needed to account for changes in accounts receivable because no
cash is involved.
C. No adjustment is needed for the payment of taxes because
the tax payment is already in net income.
indirect method requires adjusting for change in working capital accounts such
as accounts receivable, inventory, and account payable.
U.S.GAAP, which of the following statements about classifying cash flows is least
received from issuing long-term debt or stock is considered a financing cash
B. All income
taxes paid are considered operating cash flows, even if some arise from
financing and investing activities.
C. Dividend payments made are financing cash flows, while
interest payments received are investing cash flows.
Interest and dividends
received and interest paid are considered operating cash flows under
U.S.GAAP, but dividends paid are considered financing cash flows.
Reference:
Question 3.
Technologies reported the following information for the year ending December
in receivables
Depreciation
flow from investing(CFI)
flow from financing(CFF)
If the cash
balance increased $13,000 over the year, cash flow from operations (CFO) is
closest to:
A.&&& $21,250.
B.&&&& $21,750.
C.&&&& $22,250.
The easiest
way to calculate CFO here is
total cash
flow-CFI-CFF
=$13,000+5,000+4,250
Alternatively,
=$50,000-3,250-17,000-7,000-500
50. How will a
firm’s operating cash flow be affected by a decrease in accounts receivable
and by an increase in accounts payable?
A. Both will
increase operating cash flow.
B. Both will
decrease operating cash flow.
C. One will increase operating cash flow and one will decrease
operating cash flow.
A decrease in
the accounts receivable amount on the balance sheet indicates that cash
collections exceed revenues (sales). This increases operating cash flow
because receivables are being collected. An increase in the accounts payable
amount on the balance sheet indicates that purchases form suppliers exceed
cash payments. This increases operating cash flow because the cash was not
used to pay the suppliers.
51. An analyst
gather the following data about a company:
increased by
payable increased by
expenses for other inputs
debt principal repayment
tax payments
of new equipment
The company’s
CFO, based on these data only, is:
A.&&& $1,200.
B.&&&& $1,500.
C.&&&& $1,575.
received from customers
Since no change in AR
in inventory
cash input expenses
paid for inputs
paid for taxes
52. Bao Inc.
is involved in an exchange of debt for equity. In which of the following
sections of the cash flow statement would Bao record this transaction?
A. Investing
activities section.
B. Financing
activities section.
C. Footnotes to the cash flow statement.
transaction results in a reduction of debt and an increase in equity.
However, since no cash is involved, it is reported as a financing activity in
the cash flow statement, but will be disclosed in the notes to the cash flow
statement.
53. Which of
the following statements about the analysis of cash flows is least accurate?
A. Interest
payments on debt are not a financing cash flow under U.S.GAAP.
B. Both the
direct and indirect methods involve adding back noncash items such as
depreciation and amortization.
C. When using the indirect method, an analyst should add
any losses on the sales of fixed assets to net income.
When using the
direct method of calculating operating cash flows, depreciation and
amortization are not “added back” (to net income) because we don’t begin with
net income under the direct method. Depreciation and amortization are noncash
charges and are not used under the direct method. The other statements are
true. Interest payments on debt affect cash flow from operations. When using
the indirect method, an analyst should add any losses on sales of fixed
assets to net income since they are not operating cash flow.
Inc. had $4 million in bonds outstanding that were convertible into common
stock at a conversion rate of 100 shares per $1,000 bond. In 2012, all of the
outstanding bonds were converted into common stock. Bao’s average share price
for 2012 was $15. Bao’s statement of cash flows for the year ended December
31, 2012, should most likely include:
A. a footnote
describing the conversion of the bonds into common stock.
B. cash flows
from financing of +$4 million from issuance of common stock and -$4 million
from retirement of bonds.
C. cash flows from financing of +$6 million from issuance
of common stock and -$4 million from retirement of bonds and cash
flows from investing of -$2 million for a loss on retirement of bonds.
Conversion of
bonds into common stock is a non-cash transaction, but the conversion should
be disclosed in a footnote to the statement of cash flows.
In the statement of cash flows, a company is allowed to classify interest
A. in either the operating or financing section under IFRS.
B. in either the operating or financing section under U.S. GAAP.
C. only in the financing
section under both IFRS and U.S. GAAP.
requires that interest paid be classified as an IFRS
allows interest paid to be classified as either an operating or financing
Reference:
question 3.
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