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Questions and Answers
What is the primary purpose of a cash flow statement in accounting?
What is the purpose of the operating activities section in the cash flow statement?
Which of the following is considered an investing activity on a cash flow statement?
Where would you find information about the issuance of common stock on a cash flow statement?
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What is the purpose of the financing activities section in the cash flow statement?
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Study Notes
Cash Flow Statement
- The primary purpose of a cash flow statement is to provide information about a company's inflows and outflows of cash over a specific period of time.
Operating Activities
- The operating activities section of the cash flow statement reports a company's cash inflows and outflows related to its core business operations.
Investing Activities
- Investing activities on a cash flow statement include the purchase or sale of long-term assets, such as property, plant, and equipment, investments, and acquisitions.
- Examples of investing activities include purchasing a new building, selling investments, or acquiring another company.
Financing Activities
- Financing activities on a cash flow statement involve the issuance and repayment of a company's debt and equity, such as the issuance of common stock or the repayment of bonds.
- The financing activities section reports a company's cash inflows and outflows related to its financing, such as borrowing and repaying debt, issuing and repurchasing shares, and dividend payments.
- Information about the issuance of common stock can be found in the financing activities section of the cash flow statement.
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Description
Test your knowledge of accounting principles with this quiz on cash flow statements. Challenge yourself with questions about the purpose and significance of cash flow statements in financial reporting.
