Which of the following is not a typical cash flow related?
Among these options, the one that is not a typical cash flow related to equipment purchase and replacement decisions is depreciation expense. While depreciation affects profit and is reflected on financial statements, it does not directly involve cash movement.
∴ Estimating and costing activities are not included in Cash flow.
Sunk costs that have been expensed for tax purposes.
Cash flow from contingent activities would not be on the statement of cash flows.
Depreciation, amortization, depletion, stock-based compensation, and asset impairments are common non-cash charges that reduce earnings but not cash flows.
Format of a cash flow statement
Operational business activities include inventory transactions, interest payments, tax payments, wages to employees, and payments for rent. Any other form of cash flow, such as investments, debts, and dividends are not included in this section.
It is derived either directly or indirectly and measures money flow in and out of a company over specific periods. Unlike net income, OCF excludes non-cash items like depreciation and amortization, which can misrepresent a company's actual financial position.
The category that is not used for classifying cash flows is Nonoperating activities. The three accepted categories are Operating activities, Investing activities, and Financing activities.
However, depreciation is not a cash flow and is therefore not a relevant cash flow. As a result, it the annual depreciation charge should not be included within any relevant cash flow schedule.
Answer and Explanation:
The statement of cash flows does not report revenues and expenses because these items can be found in the income statement.
Which of the following is not an example of operating cash flow?
The correct answer is (d.) Cash inflows from the sale of property, plant, and equipment. The cash flows under the operating activities usually represent the cash flows related to the purchasing of inventory from suppliers and the sales of goods or services to customers, and interest received on accounts receivable.
The incorrect statement about the statement of cash flows is option D, which claims it reconciles the ending cash account balance to the bank statement. The statement of cash flows categorizes cash into operating, investing, and financing activities, but it does not reconcile with the bank statement.
In accounting, a non-cash item refers to an expense listed on an income statement, such as capital depreciation, investment gains, or losses, that does not involve a cash payment.
Operating cash flow is also generated from normal operations, less the interest and taxes paid. For example, if a client pays an invoice, it would be considered an AR activity and recorded as cash from operations. Changes in current liabilities or assets are also recorded as operating cash flow.
Purchase of fixed asset is NOT a cash inflow. Cash inflow is the money received by an organization as a result of its operating activities, investment activities, and financing activities.
| Monthly cash flow balance | = Monthly inflows - Monthly outflows |
|---|---|
| Financing cash flow | = Incoming financing cash flows - outgoing financing cash flows |
| Net cash flow | = Operating cash flow + investing cash flow + financing cash flow |
| Free cash flow | = Operating cash flow - capital expenditures |
- Salaries paid out to employees.
- Cash paid to vendors and suppliers.
- Cash collected from customers.
- Interest income and dividends received.
- Income tax paid and interest paid.
Option B) "When a business is growing, it has excess cash to invest in capital assets" is NOT true about the cash flow of a business.
She has 15+ years of experience as a financial writer and technical analyst. Operating cash flow is the money a company generates from its core business activities, excluding investments and financing, during a specific period.
Non-cash transactions: Items that do not involve actual cash exchanges should be excluded. Non-operating activities: Certain financing and investing activities that do not directly impact the operating cash flows are usually excluded.
Which of the following is not included in the statement of cash flows?
However, Profitability is not included in the statement of cash flows. Profitability is usually assessed through other financial statements such as the income statement.
This differs from the income statement, which shows accruals of income and expenses based on GAAP accounting. Furthermore, the cash flow statement does not include non-cash items like depreciation.
The three categories of cash flows are operating activities, investing activities, and financing activities. Operating activities include cash activities related to net income. Investing activities include cash activities related to noncurrent assets.
The correct option is D.
Operating cash flow excludes non-cash items, financing, and investing activities, so interest expense is excluded from operating cash flow as it is a non-operating expense and represents a financing expense.
It is broken down into three sections with operational cash flow, investment cash flow, and financing cash flows. Among the choices, the cash flows from taxation is not a category of cash flows.
