Financial Statement Analysis Flashcards
7 cards from real CPFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Statement Analysis flashcards as text
Cash flow from operating activities primarily reflects cash generated by:
Answer: Core business operations
Operating cash flow reflects cash produced or used by the company's primary business activities.
Purchasing equipment would appear in which section of the cash flow statement?
Answer: Investing activities
Buying long-term assets like equipment is classified as an investing activity.
Paying dividends to shareholders is reported under which cash flow category?
Answer: Financing activities
Dividend payments are classified as financing activities.
Free cash flow is generally calculated as operating cash flow minus:
Answer: Capital expenditures
Free cash flow equals operating cash flow minus capital expenditures.
Under the indirect method, depreciation is added back to net income because it is:
Answer: A non-cash expense
Depreciation is a non-cash expense, so it is added back when reconciling net income to operating cash flow.
A company consistently reporting net income but negative operating cash flow may signal:
Answer: Potential earnings quality concerns
Profit without supporting operating cash flow can indicate earnings quality or collection problems.
Which metric best assesses whether earnings are backed by actual cash?
Answer: Cash flow to net income ratio
Comparing operating cash flow to net income helps assess earnings quality.