Question

TRUE OR FALSE:

1. Major investing and financing activities that do not involve cash do not have to be reported as part of the statement of cash flows.

2. The payment of interest on bonds is classified as a cash outflow from operating activities on the statement of cash flows.

3. A healthy company typically shows positive cash flows in the financing activities section of the statement of cash flows.

4. In general, the cash flow from operating activities is considered by many to be the most important component of the statement of cash flows.

5. The approach to preparing the cash flow statement relies on the following rearrangement of the balance sheet equation: Change in cash = Change in (Liabilities + Stockholders' Equity + Noncash Assets).

6. In the decline phase, the company continues to enjoy positive operating cash flows but stops spending cash on investing activities and instead uses its cash for financing activities such as repaying lenders and returning excess cash to shareholders.

Answer 1

1) True
As these type of activity do not involve cash hence it is not reprted as a part of statement of cah flow. It is showm as supplement information.
ans 2 True
ans 3 False
Operating activities if has positive cash flow is a sign of healthy company than financing activities.
ans 4 True
Operating section is most important.
ans 5 False
Change in (Liabilities + Stockholders' Equity Noncash Assets).
ans 6
FALSE
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