Financial Reporting And Analysis - Financial Reporting And Analysis Section 2
- Option : A
- Explanation : Increase in accounts receivable must be subtracted from revenue adjusted for non-cash items.
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- Option : C
- Explanation : In a common size analysis of the statement of cash flows, the items of cash flow may be presented as a percentage of either total cash flow or net revenue.
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18. Cash flow is most likely to be negative:
- Option : B
- Explanation : Cash flow is most likely negative for a growth stage company. A mature company tends to perform well and has stable cash flows. A declining profits company may not necessarily have negative cash flow.
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19. The first step in cash flow statement analysis is:
- Option : A
- Explanation : Identifying the major sources and uses of cash is the first step in cash flow statement analysis.
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- Option : C
- Explanation : The first two are approaches to develop common-size cash flow statements.
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