For Each of the Following Items, Indicate by Using the Appropriate

question 127

Short Answer

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the direct method.
A. Added in determining cash receipts from customers
B. Deducted in determining cash receipts from customers
C. Added in determining cash payments to suppliers
D. Deducted in determining cash payments to suppliers
E. Cash outflow-investing activity
F. Cash inflow-investing activity
G. Cash outflow-financing activity
H. Cash inflow-financing activity
I. Significant noncash investing and financing activity
J. Is not shown
____ 1. Decrease in accounts payable during a period.
____ 2. Declaration and payment of a cash dividend.
____ 3. Decrease in accounts receivable during a period.
____ 4. Depreciation expense.
____ 5. Conversion of bonds payable into common stock.
____ 6. Decrease in merchandise inventory during a period.
____ 7. Sale of equipment for cash at book value.
____ 8. Issuance of preferred stock for cash.
____ 9. Purchase of land for cash.
____ 10. Loss on sale of a plant asset.

---

Definitions:

Return On Assets

A profitability ratio that measures how effectively a company uses its assets to generate profit, calculated as net income divided by total assets.

Profit Margin

a financial metric that shows the percentage of revenue remaining after all costs, expenses, and taxes have been deducted, indicating the efficiency and profitability of a company.

Asset Turnover

A financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue, indicating how well assets are being utilized.

Common Size Balance Sheet

A financial statement that displays all items as percentages of a common base figure, allowing for easy comparison across time periods or companies by standardizing the data.