Midterm Exam Study Notes - Financial Decisions
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Questions and Answers

What is included in Operating Activities within the statement of cash flow?

  • Revenue and expenses (correct)
  • Dividends received from investments
  • Changes in non-current assets
  • Debt and capital transactions

    • Investing Activities in the statement of cash flow focus on current liabilities and equity transactions.

    False

    What are the three main types of activities reflected in a cash flow statement?

    Operating, Investing, Financing

    The cash flow statement uses information from the income statement and the __________.

    <p>balance sheet</p> Signup and view all the answers

    When calculating cash flow from operating activities, which of the following accounts should be ignored?

    <p>Cash</p> Signup and view all the answers

    Match the activity type to its description:

    <p>Operating Activities = Relates to revenue and expenses Investing Activities = Involves non-current assets Financing Activities = Includes debt and equity transactions</p> Signup and view all the answers

    An increase in accounts receivable is added when calculating net cash flow from operating activities.

    <p>False</p> Signup and view all the answers

    What should be done if a gain is realized from the sale of an asset in cash flow calculations?

    <p>Subtract the gain</p> Signup and view all the answers

    Which of the following is a cash flow from financing activities?

    <p>Payment of long-term debt</p> Signup and view all the answers

    Accelerating cash receipts can improve cash availability.

    <p>True</p> Signup and view all the answers

    What are the two main considerations when investing excess cash?

    <p>Risk and Return</p> Signup and view all the answers

    The cash flow statement is typically divided into three categories: Operating Activities, __________, and Financing Activities.

    <p>Investing Activities</p> Signup and view all the answers

    Match the cash management strategies with their effects:

    <p>Sell marketable securities = Increase cash availability Delay payment of suppliers = Preserve cash for operations Postpone dividend payments = Retain profits Borrow on short-term basis = Meet immediate cash needs</p> Signup and view all the answers

    Which of the following is NOT a strategy to improve cash availability?

    <p>Invest in long-term bonds</p> Signup and view all the answers

    Selling equipment contributes negatively to cash flow from investing activities.

    <p>False</p> Signup and view all the answers

    Name one factor to consider regarding liquidity when investing excess cash.

    <p>The ability to convert the investment to cash quickly</p> Signup and view all the answers

    What is included in Estimated Cash Receipts?

    <p>Credit Card Sales from this month</p> Signup and view all the answers

    Estimated Cash Disbursements include only the cost of sales.

    <p>False</p> Signup and view all the answers

    What is the formula used to calculate the Final Estimated Cash?

    <p>Preliminary Estimated Cash + Working Capital Loan - Interest Repayment</p> Signup and view all the answers

    Total cash receipts are calculated as the sum of cash sales, credit card sales, and __________.

    <p>other revenue</p> Signup and view all the answers

    Match the types of cash flows to their categories:

    <p>Cash Sales = Operating Activities Sale of Equipment = Investing Activities Loan Repayment = Financing Activities Cost of Labor = Operating Activities</p> Signup and view all the answers

    Which of the following is NOT a component of Estimated Available Cash?

    <p>Total Budgeted Sales</p> Signup and view all the answers

    Working Capital Loans can be taken in flexible increments based on business needs.

    <p>True</p> Signup and view all the answers

    In cash flow analysis, what do you do with cash disbursements?

    <p>Subtract them from cash receipts to determine net cash flow.</p> Signup and view all the answers

    Preliminary Estimated Cash is calculated before accounting for __________ repayments.

    <p>interest</p> Signup and view all the answers

    The formula for calculating the Present Value of all Future Cash Flows is based on which components?

    <p>Future Value, Rate of Return, and Time Periods</p> Signup and view all the answers

    Study Notes

    Midterm Exam Study Notes - Making Financial Decisions

    • LU 1: Recap of CBV and Operating Results Analysis

      • Covers Balance Sheets and Income Statements
      • Discusses Cost of Sales formulas
      • Includes analysis techniques like horizontal analysis, vertical analysis, and ratio analysis
      • Explores financial leverage and operating leverage

    • LU 2: Predicting Profitability and Controlling Costs

      • Explains different cost types: fixed, variable, step, and mixed costs
      • Details the high-low method for determining mixed costs
      • Discusses multiple payment options in management
      • Introduces cost definitions like direct, indirect, and indifference points
      • Explains Cost Volume Profit (CVP) analysis
      • Lists assumptions of CVP analysis

    • LU 3: Managing Working Capital

      • Covers working capital and its significance
      • Details the operating cycle components, such as managing inventory, accounts payable, and short-term loans
      • Explains concepts like float and lockbox system
      • Discusses Integrated Cash management

    • LU 4: Managing Cash Flow

      • Provides a comprehensive guide to cash flow statements
      • Discusses net cash flows from operating, investing, and financing activities
      • Explains how to create a cash budget and its components
      • Includes DuPont analysis

    • Additional Topics (from pages 2 - 9)

      • Examines details on monthly days and leap years
      • Solves two-variable equations
      • Includes a 'Variance' calculation formula
      • Covers Ratio Analysis, including liquidity, solvency, activity, and profitability ratios. -Explores various ratio calculations, focusing on current ratio, acid-test ratio, cash flow to liabilities ratio, accounts receivable turnover, average collection period, working capital turnover, working capital, return on Equity, and financial leverage. -Highlights the role of ratios in aiding management in operations and profitability analysis. -Explores the significance of costs and cost analysis in a company context. -Covers the understanding and importance of fixed and variable costs in business operations. -Explores methods to determine mixed costs (e.g., high-low method) and their significance.

    • Other Formulas (From Page 30)

      • Includes a comprehensive compilation of formulas relevant for financial analysis.
      • Focuses on accounting rate of return, profit margins, present value, future value, payback period, net present value, average investment, average annual income, breakeven, lockbox system elements, and annual additional interest earned along with processing fee calculations.

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    Making Financial Decisions Mid Term Exam 2021 PDF

    Description

    This quiz provides a comprehensive overview of financial decisions and operational analysis. It includes topics such as balance sheets, profitability prediction, cost types, and working capital management. Prepare effectively for your midterm exam with these targeted study notes.

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