WGU D105 UNIT 8- STATEMENT OF
CASH FLOWS EXAM QUESTIONS &
ANSWERS PASSED ALREADY
GRADED A+
is the primary purpose of the statement of cash flows?
a. To describe a company's ability to generate future cash flows
b. To help determine a company's ability to pay upcoming debts
c. To explain the difference between net income and operating cash flow
d. To provide information about cash inflows and outflows for a period of time - Correct
Answer ✔✔ Ans d: the primary purpose of the statement of cash flows is to provide
information about inflows and outflows of cash. A secondary objective is to provide
cash-basis information about the company's operating, investing, and financing
activities.
Which question is able to be answered from this information?
a. Were cash expenditures properly approved?
b. Was the company more profitable than its competitors?
c. Did the company use cash in the most efficient way?
d. Where does the company generate cash inflows? - Correct Answer ✔✔ Ans d: the
statement of cash flows therefore reports cash receipts (cash inflows), cash payments
(cash outflows), and net change in cash resulting from a company's operating,
investing, and financing activities during a period.
What should a statement of cash flows be used for?
a. It predicts future net income of the company
b. It makes available information on cash paid to production employees
c. It provides information on how cash was spent on bonuses
d. It determines the reasons for the differences between net income and cash flow -
Correct Answer ✔✔ Ans d: the statement of cash flows provides information for the
difference between net income and the net change in cash in the operating section.
Which comparative financial statement is used for this purpose?
a. Income statement
b. Balance sheet
c. Statement of owner's equity
d. Statement of retained earnings - Correct Answer ✔✔ Ans b: a comparative accrual
balance sheet is needed to prepare an indirect statement of cash flows.
How does the direct method compare to the indirect method in preparing the statement
of cash flows?
, a. Cash flow from operations is presented differently using the direct method.
b. Cash flow from financing is presented differently using the direct method
c. Cash flow from investing is presented differently using the indirect method
d. Cash flow from asset disposals is presented differently using the indirect method
Incorrect. Asset disposals are presented the same for both the direct and indirect
methods. - Correct Answer ✔✔ Ans a: a key difference between the direct cash flow vs.
the indirect cash flow method is the type of transactions used to produce a cash flows
statement. The indirect method starts with net income as the base and adds/deducts
noncash expenses, and then adds/deducts the net increase/decrease between current
assets and current liabilities. On the other hand, the direct method only takes the cash
transactions into account (cash received from customers, and cash paid to suppliers,
employees, and others) and produces the cash flow from operations. There is no
difference in the presentation of the information for the other two sections between the
direct cash flow method and the indirect cash flow method.
A company needs to determine the order to use when presenting information in the
statement of cash flows.
Which section should be presented third?
a. Non-cash activities
b. Investing activities
c. Financing activities
d. Operating activities - Correct Answer ✔✔ Ans c: the three section of the statement of
cash flows in order are: operating, investing, and financing.
A company is preparing a statement of cash flows and needs to know the order to use
to present information.
Which section should be presented second?
a. Non-cash activities
b. Cash flow from investing activities
c. Cash flow from operating activities
d. Cash flow from financing activities - Correct Answer ✔✔ Ans b: the three section of
the statement of cash flows in order are: operating, investing, and financing.
A company is preparing a statement of cash flows and needs to know the order to use
to present information.
Which section should be presented first?
a. Non-cash activities
b. Cash flow from investing activities
c. Cash flow from operating activities
d. Cash flow from financing activities - Correct Answer ✔✔ Ans c: the three section of
the statement of cash flows in order are: operating, investing, and financing.
CASH FLOWS EXAM QUESTIONS &
ANSWERS PASSED ALREADY
GRADED A+
is the primary purpose of the statement of cash flows?
a. To describe a company's ability to generate future cash flows
b. To help determine a company's ability to pay upcoming debts
c. To explain the difference between net income and operating cash flow
d. To provide information about cash inflows and outflows for a period of time - Correct
Answer ✔✔ Ans d: the primary purpose of the statement of cash flows is to provide
information about inflows and outflows of cash. A secondary objective is to provide
cash-basis information about the company's operating, investing, and financing
activities.
Which question is able to be answered from this information?
a. Were cash expenditures properly approved?
b. Was the company more profitable than its competitors?
c. Did the company use cash in the most efficient way?
d. Where does the company generate cash inflows? - Correct Answer ✔✔ Ans d: the
statement of cash flows therefore reports cash receipts (cash inflows), cash payments
(cash outflows), and net change in cash resulting from a company's operating,
investing, and financing activities during a period.
What should a statement of cash flows be used for?
a. It predicts future net income of the company
b. It makes available information on cash paid to production employees
c. It provides information on how cash was spent on bonuses
d. It determines the reasons for the differences between net income and cash flow -
Correct Answer ✔✔ Ans d: the statement of cash flows provides information for the
difference between net income and the net change in cash in the operating section.
Which comparative financial statement is used for this purpose?
a. Income statement
b. Balance sheet
c. Statement of owner's equity
d. Statement of retained earnings - Correct Answer ✔✔ Ans b: a comparative accrual
balance sheet is needed to prepare an indirect statement of cash flows.
How does the direct method compare to the indirect method in preparing the statement
of cash flows?
, a. Cash flow from operations is presented differently using the direct method.
b. Cash flow from financing is presented differently using the direct method
c. Cash flow from investing is presented differently using the indirect method
d. Cash flow from asset disposals is presented differently using the indirect method
Incorrect. Asset disposals are presented the same for both the direct and indirect
methods. - Correct Answer ✔✔ Ans a: a key difference between the direct cash flow vs.
the indirect cash flow method is the type of transactions used to produce a cash flows
statement. The indirect method starts with net income as the base and adds/deducts
noncash expenses, and then adds/deducts the net increase/decrease between current
assets and current liabilities. On the other hand, the direct method only takes the cash
transactions into account (cash received from customers, and cash paid to suppliers,
employees, and others) and produces the cash flow from operations. There is no
difference in the presentation of the information for the other two sections between the
direct cash flow method and the indirect cash flow method.
A company needs to determine the order to use when presenting information in the
statement of cash flows.
Which section should be presented third?
a. Non-cash activities
b. Investing activities
c. Financing activities
d. Operating activities - Correct Answer ✔✔ Ans c: the three section of the statement of
cash flows in order are: operating, investing, and financing.
A company is preparing a statement of cash flows and needs to know the order to use
to present information.
Which section should be presented second?
a. Non-cash activities
b. Cash flow from investing activities
c. Cash flow from operating activities
d. Cash flow from financing activities - Correct Answer ✔✔ Ans b: the three section of
the statement of cash flows in order are: operating, investing, and financing.
A company is preparing a statement of cash flows and needs to know the order to use
to present information.
Which section should be presented first?
a. Non-cash activities
b. Cash flow from investing activities
c. Cash flow from operating activities
d. Cash flow from financing activities - Correct Answer ✔✔ Ans c: the three section of
the statement of cash flows in order are: operating, investing, and financing.
