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Questions and Answers
What is the primary purpose of a cash flow statement in accounting?
What is the primary purpose of a cash flow statement in accounting?
- To show the cash inflows and outflows during a period (correct)
- To calculate return on investment
- To provide information about a company's profitability over a specific period
- To report a company's financial position at a specific point in time
What is the purpose of the operating activities section in the cash flow statement?
What is the purpose of the operating activities section in the cash flow statement?
- To disclose changes in equity over a specific period
- To show the cash effects of a company's core business operations (correct)
- To report the cash inflows from financing activities
- To calculate net income
Which of the following is considered an investing activity on a cash flow statement?
Which of the following is considered an investing activity on a cash flow statement?
- Borrowing money
- Purchasing equipment (correct)
- Paying dividends
- Issuing common stock
Where would you find information about the issuance of common stock 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?
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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