Which of the following statements are false? Circle all that apply: I. The state

Question

Which of the following statements are false? Circle all that apply: I. The statement of cash flows helps users see the reasons for the difference between net income and net cash provided (used) by operating activities II. Both the Direct Method and Indirect Method arrive at the exact same total amount for net cash provided (used) by operating activities III. The statement of cash flows helps users examine the entity's ability to pay dividends and meet future obligations IV. Noncash activities are not reported in the body of the statement of cash flows V. The Ending Cash Balance on the statement of cash flows must always equal the cash amount recorded on the Balance Sheet

Explanation / Answer

Answer

False Statement :

III. The statement of cash flows helps users examine the entity’s ability to pay dividends and meet future obligations.

Explanation: The entity’s ability to pay dividend depends on net income and not on cash flows and entity’s ability to meet future obligations can be examined by Interest coverage ratio, debt service coverage ratio, liquidity ratios like current ratio and acid test ratio, and solvency ratio like debt equity ratio.

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