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Questions and Answers
Cash flow is considered the primary ingredient in the financial valuation model.
Cash flow is considered the primary ingredient in the financial valuation model.
True
Operating cash flow is unrelated to a firm's production and sales activities.
Operating cash flow is unrelated to a firm's production and sales activities.
False
Depreciation is determined using the Straight-Line Method for tax purposes.
Depreciation is determined using the Straight-Line Method for tax purposes.
False
Investment cash flows include cash flows from both fixed asset purchases and equity investments.
Investment cash flows include cash flows from both fixed asset purchases and equity investments.
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A decrease in any liability is considered a source of cash inflow.
A decrease in any liability is considered a source of cash inflow.
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The statement of cash flows summarizes a firm's cash activities over a specified period.
The statement of cash flows summarizes a firm's cash activities over a specified period.
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Financing cash flows include transactions related to cash inflows from sales of products.
Financing cash flows include transactions related to cash inflows from sales of products.
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Amortization refers to the write-off of tangible assets.
Amortization refers to the write-off of tangible assets.
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A cash budget is designed to cover a 5-year period.
A cash budget is designed to cover a 5-year period.
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Sales forecasts can be based solely on internal data.
Sales forecasts can be based solely on internal data.
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Financial instruments can only be real documents representing legal agreements.
Financial instruments can only be real documents representing legal agreements.
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Equity-based financial instruments include common stocks and preferred shares.
Equity-based financial instruments include common stocks and preferred shares.
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A cash forecast can assist in estimating long-term cash requirements.
A cash forecast can assist in estimating long-term cash requirements.
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The more seasonal and uncertain a firm's cash flows, the fewer the number of intervals in its cash budget.
The more seasonal and uncertain a firm's cash flows, the fewer the number of intervals in its cash budget.
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ETFs and mutual funds are considered to be cash-based instruments.
ETFs and mutual funds are considered to be cash-based instruments.
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Debt-based financial instruments include only stocks and bonds.
Debt-based financial instruments include only stocks and bonds.
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Short-term debt-based financial instruments last for more than one year.
Short-term debt-based financial instruments last for more than one year.
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External forecasts rely on internal data specific to the firm’s sales activities.
External forecasts rely on internal data specific to the firm’s sales activities.
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Treasury bills and commercial paper are examples of short-term debt-based instruments.
Treasury bills and commercial paper are examples of short-term debt-based instruments.
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Checks qualify as cash instruments because they transfer value directly between bank accounts.
Checks qualify as cash instruments because they transfer value directly between bank accounts.
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Money market accounts generally offer lower interest rates than traditional savings accounts.
Money market accounts generally offer lower interest rates than traditional savings accounts.
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The money market primarily deals with financial instruments lasting over one year.
The money market primarily deals with financial instruments lasting over one year.
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Equity-based instruments include preferred share equity and common share equity.
Equity-based instruments include preferred share equity and common share equity.
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Money market investments are characterized by their high risk and low liquidity.
Money market investments are characterized by their high risk and low liquidity.
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Net Increase/Decrease in Cash should be equivalent to the difference between the cash and marketable securities at the beginning and end of the year.
Net Increase/Decrease in Cash should be equivalent to the difference between the cash and marketable securities at the beginning and end of the year.
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Free Cash Flow (FCF) is the amount of cash flow available to investors after all operating needs and investments in net current assets are met.
Free Cash Flow (FCF) is the amount of cash flow available to investors after all operating needs and investments in net current assets are met.
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Operating Cash Flow (OCF) can be calculated using the formula OCF = NOPAT + Depreciation.
Operating Cash Flow (OCF) can be calculated using the formula OCF = NOPAT + Depreciation.
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NOPAT stands for Net Operating Profit After Taxes and is calculated as EBIT x (1 + T).
NOPAT stands for Net Operating Profit After Taxes and is calculated as EBIT x (1 + T).
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Cash Planning involves the preparation of the firm's annual profit plans.
Cash Planning involves the preparation of the firm's annual profit plans.
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Money market investments typically yield higher returns than other investment types.
Money market investments typically yield higher returns than other investment types.
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Short Term (Operating) Financial Plans specify long-term financial strategies and goals.
Short Term (Operating) Financial Plans specify long-term financial strategies and goals.
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Large corporations can directly borrow from the money market if they have short-term cash flow needs.
Large corporations can directly borrow from the money market if they have short-term cash flow needs.
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The Financial Planning Process begins with strategic financial plans that guide the formulation of operational plans.
The Financial Planning Process begins with strategic financial plans that guide the formulation of operational plans.
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Money market mutual funds are managed by individuals looking to invest their surplus cash directly.
Money market mutual funds are managed by individuals looking to invest their surplus cash directly.
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Net Fixed Assets Investment excludes depreciation in the calculation of Free Cash Flow.
Net Fixed Assets Investment excludes depreciation in the calculation of Free Cash Flow.
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Capital markets are only involved in the sale and purchase of equity instruments.
Capital markets are only involved in the sale and purchase of equity instruments.
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Primary and Secondary Markets are the two categories of capital markets.
Primary and Secondary Markets are the two categories of capital markets.
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Suppliers in capital markets are typically businesses and individuals seeking capital.
Suppliers in capital markets are typically businesses and individuals seeking capital.
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The best-known capital markets include only the Stock Market.
The best-known capital markets include only the Stock Market.
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Households can act as suppliers in capital markets through their savings accounts with banks.
Households can act as suppliers in capital markets through their savings accounts with banks.
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