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    Reading 33 Analyzing Statements of Cash Flows II

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    Haider Shahbaz

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    Reading 33 Analyzing Statements of Cash Flows II

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    Haider Shahbaz
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    3 views3 pages

    Reading 33 Analyzing Statements of Cash Flows II

    Uploaded by

    Haider Shahbaz

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    © All Rights Reserved
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    Download as pdf or txt
    of 3

    CFA

    ANALYZING STATEMENTS
    OF CASH FLOWS II
    33

    1. Joplin Corporation reports the following in its year-end financial statements:


    • Net income of $43.7 million.
    • Depreciation expense of $4.2 million.
    • Increase in accounts receivable of $1.5 million.
    • Decrease in accounts payable of $2.3 million.
    • Sold equipment for $15 million.
    • Purchased equipment for $35 million.
    Joplin's free cash flow to the firm (FCFF) is closest to:
    (A) $ 39 million.
    (B) $ 24 million.
    (C) $ 28 million.

    2. The RR Corporation had cash flow from operations of $20 million. RR purchased $5
    million in equipment and sold $3 million of equipment during the period. What is RR's
    free cash flow to equity for the period?
    (A) $15 million.
    (B) $18 million.
    (C) $22 million.

    3. A common-size cash flow statement is least likely to provide payments to employees as


    a percentage of:
    (A) revenues for the period.
    (B) operating cash flow for the period.
    (C) total cash outflows for the period.

    4. A common-size cash flow statement is least likely to show each cash inflow as a
    percentage of:
    (A) revenue.
    (B) all cash inflows.
    (C) total cash flows.

    Financial Statement Analysis 1 Analyzing Statements of Cash Flows II


    CFA

    5. How does decreasing accounts payable turnover affect a company's cash flow from
    financing activities and is this source of cash sustainable?
    Financing cash flow Sustainable source
    (A) Increase No
    (B) No impact No
    (C) No impact Yes

    6. Which of the following best describes a ratio that measures a firm's ability to acquire
    long term assets with cash flows from operations, and a performance ratio,
    respectively?
    Acquire assets with CFO Performance ratio
    (A) Investing and financing ratio Cash-to-income ratio
    (B) Reinvestment ratio Cash-to-income ratio
    (C) Reinvestment ratio Debt payment ratio

    7. Selected information from the most recent cash flow statement of Thibault Company
    appears below:
    Cash collections € 8,900
    Cash paid to suppliers (€3,700)
    Cash operating expenses (€1,500)
    Cash taxes paid (€2,400)
    Cash from operating activities €1,300
    Cash paid for plant and equipment (€2,600)
    Cash interest received €700
    Cash dividends received €600
    Cash from investing activities (€1,300)
    Cash received from debt issuance €2,000
    Cash interest paid (€400)
    Cash dividends paid (€600)
    Cash from financing activities €1,000
    Total change in cash €1,000
    (A) 0.50.
    (B) 0.75.
    (C) 1.00.

    Financial Statement Analysis 2 Analyzing Statements of Cash Flows II


    CFA

    8. David Chance, CFA, is analyzing Grow Corporation. Chance gathers the following
    information:
    Net cash provided by operating $3,500
    activities
    Net cash used for fixed capital $727
    investments
    Cash paid for interest $195
    Income before tax $4,400
    Income tax expense $1,540
    Net Income $2,860
    Grow's free cash flow to the firm (FCFF) is closest to:
    (A) $ 2,640.
    (B) $ 2,900.
    (C) $ 2,260.

    9. Consider the following:


    Statement #1: One approach to presenting a common-size cash flow statement is to
    express each inflow of cash as a percentage of total cash inflows and each outflow of
    cash as a percentage of total cash outflows.
    Statement #2: Expressing each line item of the cash flow statement as a percentage of
    revenue is useful in forecasting future cash flows.
    Which of these statements regarding a common-size cash flow statement is (are)
    CORRECT?
    (A) Only statement #1 is correct.
    (B) Only statement #2 is correct.
    (C) Both statements are correct

    Financial Statement Analysis 3 Analyzing Statements of Cash Flows II

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