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Free cash flows to all debt and common equity shareholders represents the excess of cash flows from a

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1. Free cash flows to all debt and common equity shareholders represents the excess of cash flows from
   a. operating activities over cash flows for financing activities
   b. investing over cash flows for operating activities
   c. investing over cash flows for financing activities
   d. operating activities over cash flows for investing activities
2. When preparing the statement of cash flows using the indirect method, an increase in inventories
   would appear as
   a. a decrease in the operating activities section
   b. an increase in the operating activities section
   c. a use of cash in the investing activities section
   d. a source of cash in the investing activities section
3. When preparing the statement of cash flows using the indirect method, an increase in accounts payable
   would appear as
   a. a decrease in the operating activities section
   b. an increase in the operating activities section
   c. a use of cash in the investing activities section
   d. a source of cash in the investing activities section
4. When preparing the statement of cash flows using the indirect method, the payment of dividends
   would appear as
   a. a decrease in the operating activities section
   b. an increase in the operating activities section
   c. a use of cash in the financing activities section
   d. a source of cash in the financing activities section
5. When preparing the statement of cash flows using the indirect method, the sale of marketable
   securities would appear as
   a. a use of cash in the investing activities section
   b. a source of cash in the investing activities section
   c. a use of cash in the financing activities section
   d. a source of cash in the financing activities section
6. In a statement of cash flows, interest received from sources other than a company's investments
   would be classified as cash inflows from
   a. lending activities.
   b. operating activities.
   3-4
   c. investing activities.
   d. financing activities.
7. An example of an item that is deducted from net income when preparing the operating activities
   section of the statement of cash using the indirect method is
   a. depreciation expense.
   b. compensation expense related to stock option plans.
   c. income from an investment accounted for using the equity method.
   d. unrealized losses on trading investments
8. Which of the following is the correct formula for calculating cash collections from customers?
   a. sales for the period plus accounts receivable at the beginning of the period
   b. sales for the period plus accounts receivable at the beginning of the period minus accounts
   receivable at the end of the period
   c. sales for the period plus accounts receivable at the end of the period
   d. sales for the period plus accounts receivable at the end of the period minus accounts
   receivable at the beginning of the period
9. . Outback Corp. recorded sales of $1,300,000 in 2010, in addition the company's accounts receivable
   balance grew from $120,000 at the beginning of 2010 to $165,000 at the end of 2010. How much cash
   did Outback collect from customers in 2010?
   a. $1,300,000
   b. $1,345,000
   c. $1,255,000
   d. $1,135,000

. Toro Company recognized $655,000 of cost of goods sold in 2010, in addition its implementation of a
just-in-time inventory system allowed it to reduce its inventory from $325,000 at the beginning of the
year to $230,000 at the end of 2010. How much cash did Toro spend for inventory in 2010?
a. $655,000
b. $980,000
c. $560,000
d. $620,000