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2. Which of the following statements is CORRECT?
a. The statement of cash flows reflects cash flows from operations, but
it does not reflect the effects of buying or selling fixed assets.
b. The statement of cash flows shows where the firm’s cash is located;
indeed, it provides a listing of all banks and brokerage houses where
cash is on deposit.
c. The statement of cash flows reflects cash flows from continuing
operations, but it does not reflect the effects of changes in working
capital.
d. The statement of cash flows reflects cash flows from operations and
from borrowings, but it does not reflect cash obtained by selling new
common stock.
e. The statement of cash flows shows how much the firm’s cash--the
total of currency, bank deposits, and short-term liquid securities (or cash
equivalents)--increased or decreased during a given year.
3. Which of the following statements is CORRECT?
a. Dividends paid reduce the net income that is reported on a company’s
income statement.
b. If a company uses some of its bank deposits to buy short-term, highly
liquid marketable securities, this will cause a decline in its current assets
as shown on the balance sheet.
c. If a company issues new long-term bonds during the current year, this
will increase its reported current liabilities at the end of the year.
d. Accounts receivable are reported as a current liability on the balance
sheet.