Explain the value of separating cash flows into operating activities, investing activities, and financing activities to financial statement users in analyzing cash flows and the company's financial performance and condition.
What will be an ideal response?
By separating cash flows into three categories, the statement of cash flows allows users to focus their analysis on specific areas of importance. The operating section of the statement reveals the net effect of cash inflows and cash outflows from the core activities of a business which directly affect its operating income. Operating cash flows indicate the health of a business. A business with a declining or negative amount of cash from operating activities may be in financial difficulty. Analysis of the financing section reveals to financial statement users how a business raises funds from the outside. Analysis of the investing activity section reveals whether or not a firm is acquiring new assets and disposing of existing assets and thus investing in the future of the company.
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Using either the FIFO and LIFO cost flow assumption will result in the same cost of goods sold when
a. the number of units in beginning and ending inventory are the same. b. two consecutive years are combined. c. the prices of the goods do not change. d. lower-of-cost-or-market is applied. e. none of the above
A(n) ____________________ cannot serve as an entire statement.
Fill in the blank(s) with the appropriate word(s).
Under an antilapse clause, an insurance policy will lapse only if no premium is paid on the date due.
Answer the following statement true (T) or false (F)
The rate used to discount projected merger cash flows should be the overall cost of capital of the new consolidated firm because it incorporates the actual capital structure of the new firm.
Answer the following statement true (T) or false (F)