Question Details

Austin Financial recently announced that its net income increased sharply 


1.	Which of the following factors could explain why Michigan Energy's cash balance increased even though it had a negative cash flow last year?

a.	The company sold a new issue of bonds.
b.	The company made a large investment in new plant and equipment.
c.	The company paid a large dividend.
d.	The company had high depreciation expenses.
e.	The company repurchased 20% of its common stock.

2.	Analysts who follow Howe Industries recently noted that, relative to the previous year, the company- net cash provided from operations increased, yet cash as reported on the balance sheet decreased.  Which of the following factors could explain this situation?

a.	The company cut its dividend.
b.	The company made large investments in fixed assets.
c.	The company sold a division and received cash in return.
d.	The company issued new common stock.
e.	The company issued new long-term debt.

3.	Austin Financial recently announced that its net income increased sharply from the previous year, yet its net cash provided from operations declined.  Which of the following could explain this performance?

a.	The company- dividend payment to common stockholders declined.
b.	The company- expenditures on fixed assets declined.
c.	The company- cost of goods sold increased.
d.	The company- depreciation expense declined.
e.	The company- interest expense increased.

4.	Which of the following statements is CORRECT?

a.	The statement of cash flows reflects cash flows from operations, but it does not reflect the effects of buying or selling fixed assets.
b.	The statement of cash flows shows where the firm- cash is located; indeed, it provides a listing of all banks and brokerage houses where cash is on deposit.
c.	The statement of cash flows reflects cash flows from continuing operations, but it does not reflect the effects of changes in working capital.
d.	The statement of cash flows reflects cash flows from operations and from borrowings, but it does not reflect cash obtained by selling new common stock.
e.	The statement of cash flows shows how much the firm- cash--the total of currency, bank deposits, and short-term liquid securities (or cash equivalents)--increased or decreased during a given year.
5.	Which of the following statements is CORRECT?

a.	In the statement of cash flows, a decrease in accounts receivable is subtracted from net income in the operating activities section. 
b.	Dividends do not show up in the statement of cash flows because dividends are considered to be a financing activity, not an operating activity.
c.	In the statement of cash flows, a decrease in accounts payable is subtracted from net income in the operating activities section.
d.	In the statement of cash flows, depreciation is subtracted from net income in the operating activities section.
e.	In the statement of cash flows, a decrease in inventories is subtracted from net income in the operating activities section.




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