“Cash Is King” for all businesses You can determine a company’s cash situation by analyzing the cash flow statement. The cash flow statement also helps determine whether the company (1) is generating enough cash from its operations to make new investments and pay dividends or (2) will need to generate cash by issuing new debt or selling its assets. Which of the following is true for the statement of cash flows? It reflects cash generated and used during the reporting period. It reflects revenues when earned. Three categories of activities (operating, investing, and financing) generate or use the cash flow in a company. In the following table, identify which type of activity is described by each statement. Operating Activity Investing Activity Financing Activity Yum Co. uses cash to repurchase 10% of its common stock. A pharmaceutical company buys marketing rights to sell a drug exclusively in East Asian markets. A company records a decrease in its total raw materials inventory from the previous year. Fitzi Chemical Co. earns revenue from its cash receipts from royalties. Len Corp. reported net sales of $300 million last year and generated a net income of $66.00 million. Last year’s accounts receivable increased by $29 million. What is the maximum amount of cash that Len Corp. received from sales last year? $203.25 million $95.00 million $135.50 million $271.00 million

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter11: The Statement Of Cash Flows

Section: Chapter Questions

Problem 26BE

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Question

“Cash Is King” for all businesses

You can determine a company’s cash situation by analyzing the cash flow statement. The cash flow statement also helps determine whether the company (1) is generating enough cash from its operations to make new investments and pay dividends or (2) will need to generate cash by issuing new debt or selling its assets.

Which of the following is true for the statement of cash flows?

It reflects cash generated and used during the reporting period.

It reflects revenues when earned.

Three categories of activities (operating, investing, and financing) generate or use the cash flow in a company. In the following table, identify which type of activity is described by each statement.

	Operating Activity	Investing Activity	Financing Activity
Yum Co. uses cash to repurchase 10% of its common stock.
A pharmaceutical company buys marketing rights to sell a drug exclusively in East Asian markets.
A company records a decrease in its total raw materials inventory from the previous year.
Fitzi Chemical Co. earns revenue from its cash receipts from royalties.

Len Corp. reported net sales of $300 million last year and generated a net income of $66.00 million. Last year’s accounts receivable increased by $29 million. What is the maximum amount of cash that Len Corp. received from sales last year?

$203.25 million

$95.00 million

$135.50 million

$271.00 million

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