CFM Cash Flow Management

Question 1

Which section of the cash flow statement includes collections from customers and payments to suppliers?

Accepted Answer

Operating activities

Answer

Investing activities

Answer

Financing activities

Answer

Non-cash activities

Question 2

Under the indirect method of preparing the cash flow statement, net income is adjusted for what?

Accepted Answer

Changes in working capital and non-cash items

Answer

Dividends paid to shareholders

Answer

Capital expenditures

Answer

Proceeds from debt issuance

Question 3

Which of the following is classified as an investing activity in the cash flow statement?

Accepted Answer

Purchase of equipment

Answer

Payment of dividends

Answer

Repayment of long-term debt

Answer

Issuance of common stock

Question 4

What does free cash flow (FCF) represent?

Accepted Answer

Cash from operations minus capital expenditures

Answer

Net income plus depreciation

Answer

Total cash on the balance sheet

Answer

Revenue minus all operating costs

Question 5

A company with positive net income but negative operating cash flow most likely has:

Accepted Answer

Significant working capital buildup (e.g., receivables or inventory growth)

Answer

Declining revenues

Answer

Excessive capital expenditures

Answer

High dividend payments

Question 6

What is the cash conversion cycle (CCC)?

Accepted Answer

DIO + DSO − DPO, measuring how long cash is tied up in operations

Answer

The time to convert fixed assets into cash

Answer

The ratio of operating cash flow to net income

Answer

The number of days to repay long-term debt