Question

5. Cash flows 

"Cash Is King" for all businesses 

You can determine a company's cash situation by analyzing the 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) will need to generate cash by issuing new debt or selling its assets. 

Which of the following is true for the statement of cash flows? 

• It reflects revenues when earned 

• It reflects cash generated and used during the reporting period 

Three categories of activities (operating, investing, and financing) generate or use the cash flow in a company. In the following table, identify which type of activity is described by each statement. 

• The Yum chain of restaurants conducts an initial public offering to raise funds for expansion. 

• A company reports a 10% increase in its accounts payable from the last month. 

• D and W Co. sells its last season's inventory to a discount store 

• A company buys some common stock in its supplier's firm with its extra cash 

Global Satellite Corp. reported net sales of $350 million last year and generated a net income of $77 million. Last year's accounts receivable increased by $29 million. What is the maximum amount of cash that Global Satellite Corp received from sales last year? 

• $106 million 

• $241 million 

• $161 million 

• $321 million

Answer 1

A) It reflects cash generated and used during the reporting period.

B)

a. Financing

b. Operating

c. Operating

d. Investing

C) Net sales- AR receivable = 350-29= 321 million