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CHAPTER 10
STATEMENT OF CASH FLOWS
AND
WORKING CAPITAL ANALYSIS
TRUE or FALSE QUESTIONS
(Correct answer indicated by T for True answers and F for False answers)
income statement.
and its creditors and owners.
of depreciable assets.
treated as a negative number in a SCF.
added back in the operating section of a SCF, indirect method.
are treated as a negative number on a SCF.
activities.
activities section of a SCF.
assets, and liabilities, non-cash expenses, and gains or losses on the disposal of non-
current assets.
section of a SCF.
affects the operating section of the statement.
transactions that occurred at a specific point in time.
capital is to provide prospective investors with information.
affect working capital.
detailed information from the current asset and liability accounts on the balance sheet
is required.
ings statement, and the balance sheets is sometimes required to compile a statement of
source inflows and use outflows of working capital.
outflows of working capital need not be reconciled with any other figures.
$20,000, only the difference of $17,000 will appear as a use of funds in the statement
of source inflows and use outflows of working capital.
asset and liability accounts increased or decreased during the period.
in current liabilities during the period, this will cause a decrease in total working
capital.
before a statement of source inflows and use outflows of funds can be compiled.
ability as is its current ratio.
MULTIPLE CHOICE QUESTIONS
(Correct answer indicated by asterisk)
1. Working capital is:
2. The three major activities evaluated in a SCF are:
3. If kitchen equipment were purchased for $24,400 during the current period, the cost of the
purchase would be shown as a:
4. Restaurant furnishings with an original cost of $38,000 and accumulated depreciation
account of $32,000, was sold for $4,200 cash. How will the proceeds of the sale be reported
in a SCF, indirect method?
5. A restaurant owner borrowed $150,000 from a bank on a long-tem note. This transaction
would be shown on a SCF as $150,000 cash?
6. Depreciation expense on the income statement was $8,000. Which of the following
statements is correct?
7. The source inflows and use outflows of a working capital statement shows:
8. A small corporate restaurant repurchased 5,000 shares of its own stock for $50,000 cash
during the current period. How is this shown in a SCF?
9. One of the following is not a use of working capital:
10. Which of the following is not a source of working capital?
11. If marketable securities owned by a company were sold for cash, this would be a/an:
12. If the furniture and equipment account balance was $50,000 at the beginning of the period
and $40,000 at the end of the period, we could assume that:
13. The statement of changes in working capital is a:
14. If the statement of changes in working capital showed that a bank loan had been decreased
from the beginning to the end of the period, this would be a/an:
15. It is important to know the dollar amount of working capital at any time because it:
16. If two different companies had the same dollar amounts of working capital:
17. A motel can operate with a relatively low current ratio because:
18. If current assets are $75,000 and current liabilities are $100,000, the current ratio is?
