5. Cash flows Aa Aa \"Cash Is King\" for all businesses You can determine a comp

Question

5. Cash flows Aa Aa "Cash Is King" for all businesses You can determine a company's cash situation by analyzing its cash flow statement. The cash flow statement also helps determine whether the company (1) is generating enough cash from its operations to make new investments and pay dividends or (2) need to generate cash by issuing new debt or selling its assets. Which of the following is true for the statement of cash flows? O It reflects revenues when earned O It reflects cash generated and used during the reporting period The statement of cash flows reports a company's cash inflows and outflows for a given accounting period by categorizing the company's sources (inflows) and uses (outflows) of cash as either operating, investing, or financing activities Determine whether the activities described in the following table should be categorized as operating, investing, or financing activities in the statement of cash flows. Operating Activity Investing Activity Financin Activity Activity A company reports a 10% increase in its accounts payable from the last month. DigiInk Printing Co. buys new machinery to ramp up its production capacity The HappySnacks chain of restaurants conducts an initial public offering to raise funds for expansion Ruth Enterprises distributes a holiday bonus to all its employees Green Caterpillar Garden Supplies Inc. reported net sales of $3,500,000 last year and generated a net income of $875,000. Last year's accounts receivable increased by $290,000. What is the maximum amount of cash that Green Caterpillar received from sales last year? $1,605,000 $1,165,000 $2,407,500 O $3,210,000

Explanation / Answer

Answer 5) a)

Cash flow statement shows inflow of cash and outflow has cash. Cash flow statement has nothing to do with accruals or deferrals .

Hence statement “ It reflects cash generated and used during the reporting year”

Answer 5) b)

Answer 5)c)

Maximum amount of cash received from sales= Net sales – increase in account receivable

Net sales = 3,500,000

Less: Increase in AR = 290,000

Maximum amount of cash received = 3,210,000

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