Warning Signs of Problems in Managing Cash Flows Are

question 1

Multiple Choice

Warning signs of problems in managing cash flows are:

• A) dividends paid to shareholders that are greater than profit.
• B) proceeds of borrowing that are continually greater than repayments of borrowings.
• C) cash flow from operating activities that is significantly lower than profit.
• D) all of the above.

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Definitions:

Depreciation Expense

The allocation of the cost of tangible assets over their useful lives.

Indirect Method

A method used for the preparation of the cash flow statement which adjusts net income for changes in balance sheet accounts to calculate the cash from operating activities.

Operating Activities

These involve the primary, day-to-day actions that generate revenue and incur expenses in the normal course of business, reflected in the cash flows from operations section of the statement of cash flows.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or the business’s operating cycle, whichever is longer, such as cash, inventory, and receivables.