Questions from Managerial Accounting

Q: What is the purpose of a statement of cash flows?

What is the purpose of a statement of cash flows?

Q: If the Accounts Receivable balance increases during a period, how will

If the Accounts Receivable balance increases during a period, how will this increase be recognized using the indirect method of computing the net cash provided by operating activities?

Q: Would a sale of equipment for cash be considered a financing activity

Would a sale of equipment for cash be considered a financing activity or an investing activity? Why?

Q: What is the difference between net cash provided by operating activities and

What is the difference between net cash provided by operating activities and free cash flow?

Q: Why is interest paid on amounts borrowed from banks and other lenders

Why is interest paid on amounts borrowed from banks and other lenders considered to be an operating activity while the amounts borrowed are financing activities?

Q: If an asset is sold at a gain, why is the

If an asset is sold at a gain, why is the gain deducted from net income when computing the net cash provided by operating activities under the indirect method?

Q: Why aren’t transactions involving accounts payable considered to be financing activities?

Why aren’t transactions involving accounts payable considered to be financing activities?

Q: Assume that a company repays a $300,000 loan from

Assume that a company repays a $300,000 loan from its bank and then later in the same year borrows $500,000. What amount(s) would appear on the statement of cash flows?

Q: What are the three major sections on a statement of cash flows

What are the three major sections on a statement of cash flows, and what are the general rules that determine the transactions that should be included in each section?

Q: How do the direct and the indirect methods differ in their approach

How do the direct and the indirect methods differ in their approach to computing the net cash provided by operating activities?