Besides net income, what is typically the largest source of operating cash flow?

Question

Besides net income, what is typically the largest source of operating cash flow?

1)

Receivables

2)

Pension

3)

Depreciation & Amortization

4)

Purchases of businesses (acquisitions)

Acquisition activity has been strong. Which have been sources of cash to fund deals?

1)

Operating cash flow

2)

Issuing debt

3)

Both options

4)

Neither option

Cost of goods sold (cost of sales) may include all of the following except.

1)

Raw materials

2)

Direct (factory) labor

3)

Management salaries

4)

Purchased components

Which of the following is true when using the earnings record to appraise a stock for investment?

1)

Multiples used in valuation should relate to average earnings.

2)

Be justified by indications available about the future.

3)

Cover at least five years and preferably 7-10 years (Professor L says 10+).

4)

All of the above.

Which of a company's three main financial statements is easiest to manipulate?

1)

Income statement

2)

Balance sheet

3)

Cash flow statement

4)

Management letter

1A.List three ways to manipulate the income statement (income accounts) of a company?

2A. Suppose over the next two years payables became a significant source of cash flow. What would this mean on the balance sheet and what would be your concern?

1)

Receivables

2)

Pension

3)

Depreciation & Amortization

4)

Purchases of businesses (acquisitions)

Explanation / Answer

1)

Operating cash flows = Net income+Depreiciation and amortization

Depreciation and amortizations are non-cash expenses, these expenses are added back to net income to arrive real operating cash flows.

Hence, correct option is (3) Depreciation & Amortization.

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