COB 242 EXAM I QUESTIONS AND
ANSWERS
Statement of Cash Flows - Correct Answers -Explains the increase or decrease in cash
and how cash was generated and used during the period
Most important cash flow section - Correct Answers -Operating activities
Operating Activities - Correct Answers -Day-to-day profit-making activities that affect net
income and current assets and liabilities
Investing Activities - Correct Answers -Buying and selling long-term assets such as
equipment, land, investments, and notes receivable
Financing Activities - Correct Answers -Activities that generate or repay capital,
including issuing stock, borrowing, repaying debt, and paying dividends
Cash - Correct Answers -Includes petty cash, checking accounts, and savings accounts
Cash Equivalents - Correct Answers -Very safe, highly liquid assets with short
maturities (less than 3 months)
Key Difference: Managerial vs Financial - Correct Answers -Managerial accounting
separates fixed and variable costs
Planning - Correct Answers -Setting goals and determining how to achieve them
Directing - Correct Answers -Overseeing day-to-day operations
Examples of Cash Equivalents - Correct Answers -Money market funds, short-term
CDs, U.S. Treasury bills
Free Cash Flow - Correct Answers -Cash from operating activities minus capital
expenditures
Capital Expenditures - Correct Answers -Purchases of property, plant, and equipment
Interest Income - Correct Answers -Operating activity
Dividend Income - Correct Answers -Operating activity
ANSWERS
Statement of Cash Flows - Correct Answers -Explains the increase or decrease in cash
and how cash was generated and used during the period
Most important cash flow section - Correct Answers -Operating activities
Operating Activities - Correct Answers -Day-to-day profit-making activities that affect net
income and current assets and liabilities
Investing Activities - Correct Answers -Buying and selling long-term assets such as
equipment, land, investments, and notes receivable
Financing Activities - Correct Answers -Activities that generate or repay capital,
including issuing stock, borrowing, repaying debt, and paying dividends
Cash - Correct Answers -Includes petty cash, checking accounts, and savings accounts
Cash Equivalents - Correct Answers -Very safe, highly liquid assets with short
maturities (less than 3 months)
Key Difference: Managerial vs Financial - Correct Answers -Managerial accounting
separates fixed and variable costs
Planning - Correct Answers -Setting goals and determining how to achieve them
Directing - Correct Answers -Overseeing day-to-day operations
Examples of Cash Equivalents - Correct Answers -Money market funds, short-term
CDs, U.S. Treasury bills
Free Cash Flow - Correct Answers -Cash from operating activities minus capital
expenditures
Capital Expenditures - Correct Answers -Purchases of property, plant, and equipment
Interest Income - Correct Answers -Operating activity
Dividend Income - Correct Answers -Operating activity
