Cash Flow Quiz

By: Staff
Image: refer to hsw

About This Quiz

Before you invest a dime in the stock market, you need to learn the ins and outs of financial reports, those enigmatic quarterly statements that read like Greek translated into Klingon. Then test your knowledge with our cash flow quiz.

How many times a year are public companies required by the Securities and Exchange Commission (SEC) to file an earnings report?

Companies that issue and sell stock are required to report their earnings quarterly.

Which of the following financial statements is NOT typically included in quarterly reports?

Besides the balance sheet and statement of cash flows, quarterly financial filings also include an earnings or income report.

Which corporate accounting method is used to calculate earnings and profitability?

Accrual accounting calculates earnings and profitability. Cash flow, on the other hand, is tracked through cash accounting.

What is the major difference between accrual and cash accounting?

Many analysts think cash accounting gives a more accurate picture of a company's liquidity because it keeps track of when cash changes hands.

What does "operations" refer to in corporate accounting?

Income and cash flow from operations are the best reflection of a company's financial health.

Which of the following departments handles unpaid invoices from clients?

When the invoice is paid by accounts receivable, the money is added to cash flow from operations.

Is it possible for a company to have positive cash flow from operations but negative earnings?

Operating cash flow is only one measurement of a company's profitability. There are many other ways for a company to spend/lose money that could result in negative total earnings.

Which of the following is NOT one of the three sections included in a statement of cash flows?

The third section is called cash flow from operations, not sales.

Which of the following is NOT considered a business investment?

Employee salaries fall under operations, not investment.

If a company sells off a portion of its own business, is that considered a "cash in" or "cash out" transaction?

A sale of any asset, even if it might lead to a future loss in productivity or profit, is considered "cash in" for the cash flow statement.

Which of the following is an example of financing through debt?

Corporations tend to avoid bank loans because they are more restrictive than other types of financing. They'll look for an "angel" investor.

True or false: public companies can issue and sell bonds.

Companies can sell corporate bonds to fund operations, but they have to pay interest to bondholders.

Which of the following is NOT an example of non-operating cash flow?

OK, that one might have been too easy.

What is the equation for calculating free cash flow?

Capital expenditures (CAPEX) can also be found on the cash flow statement.

What are the three assets typically included in capital expenditures?

Sometimes capital expenditures are listed on the cash flow statement as PPE.

Which type of capital expenditure represents investments (repairs and replacements) in existing PPE?

Some analysts believe that using maintenance capital expenditures instead of full PPE gives a more accurate measurement of free cash flow.

What is the equation for calculating operating cash flow margin?

The higher the operating cash flow margin, the more efficient the company is at converting sales to cash.

What is the equation for calculating operating cash flow ratio?

The higher the number, the more likely the company has enough cash to cover its short-term debts.

What are the two columns on a balance sheet called?

Beyond showing current assets and liabilities, the balance sheet also indicates shareholder or ownership equity in the company.

Which is the single most important indicator of a company's financial health?

No single indicator will tell you the whole story. A savvy investor weighs each report against the other to get the most accurate picture.

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