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17 - 1 Statement of Cash Flows Ex. 180 The following information is available for Sally Corporation for the year ended December 31, 2014: Collection of principal on long-term loan to a supplier$15,000 Acquisition of equipment for cash10,000 Proceeds from the sale of long-term investment at book value20,000 Issuance of common stock for cash27,000 Depreciation expense28,000 Redemption of bonds.
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18 - 1 Financial Statement Analysis 57.A horizontal analysis performed on a statement of retained earnings would not show a percentage change in a.dividends paid. b.net income. c.expenses. d.beginning retained earnings. 58.Under which of the following cases may a percentage change be computed? a.The trend of the balances is decreasing but all balances are positive. b.There is no balance.
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18 - 1 Financial Statement Analysis 117.Blitzen Corporation had net income of $500,000 and paid dividends to common stockholders of $40,000 in 2014. The weighted average number of shares outstanding in 2014 was 60,000 shares. Blitzen Corporation's common stock is selling for $50 per share on the New York Stock Exchange. Blitzen.
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17 - 1 Statement of Cash Flows COMPLETION STATEMENTS               197.A statement of cash flows summarizes the operating, ____________, and  ___________ activities of an entity.               198.The cash effects of selling goods and services appears in the ______________ activities section of a statement of cash flows.               199.The operating activities section of the statement of.
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17 - 1 Statement of Cash Flows Ex. 184 The three accounts shown below appear in the general ledger of Larson Corp. during 2014.                                   Equipment                                  DateDebitCreditBalance Jan.1Balance160,000 July 31Purchase of equipment75,000235,000 Sept.2Cost of equipment constructed56,000291,000 Nov.10Cost of equipment sold45,000246,000                          Accumulated Depreciation—Equipment                   DateDebitCreditBalance Jan.1Balance71,000 Nov. 10Accumulated depreciation on         equipment sold30,00041,000 Dec.31Depreciation for year20,00061,000 Ex. 184(Cont.)                               Retained Equipment                              DateDebitCreditBalance Jan.1Balance105,000 Aug.23Dividends (cash)15,00090,000 Dec.31Net income50,000140,000 Instructions From the postings in the accounts, indicate how the.
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17 - 1 Statement of Cash Flows Ex. 174 The following information is available for Redcands Company: Receipts from customers$215,000 Dividends from stock investments3,000 Proceeds from sale of equipment18,000 Proceeds from issuance of stock90,000 Payments for inventory100,000 Payments for operating expenses78,000 Interest paid6,000 Taxes paid4,000 Dividends paid20,000 Instructions Based on the preceding information, compute the net cash provided by operating activities. Ex. 175 Plough Company reported.
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18 - 1 Financial Statement Analysis 11.In horizontal analysis, if an item has a negative amount in the base year, and a positive amount in the following year, no percentage change for that item can be computed. 12.Common size analysis expresses each item within a financial statement in terms of a percent of.
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17 - 1 Statement of Cash Flows aEx. 193 The income statement of Frank Company is shown below: FRANK COMPANY Income Statement For the Year Ended December 31, 2014 Sales$8,400,000 Cost of goods sold  5,400,000 Gross profit3,000,000 Operating expenses Selling expenses$500,000 Administrative expense700,000 Depreciation expense90,000 Amortization expense    30,000  1,320,000 Net income$1,680,000 Additional information: 1.Accounts receivable increased $400,000 during the year. 2.Inventory increased $250,000 during the year. 3.Prepaid expenses increased.
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17 - 1 Statement of Cash Flows Ex. 187 The following information is available for Young Corporation: Capital expenditures$115,000 Cash dividends75,000 Cash provided by operations220,000 Net income130,000 Sales600,000 Instructions Compute Young Corporation's free cash flow. aEx. 188 Dredd Company has begun a worksheet for preparing a statement of cash flows. The following additional information is provided: 1.Cash dividends of $8,000 were paid during.
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17 - 1 Statement of Cash Flows 147.Financing activities involve a.lending money to other entities and collecting on those loans. b.cash receipts from sales of goods and services. c.acquiring and disposing of productive long-lived assets. d.long-term liability and owners' equity items. 148.The information to prepare the statement of cash flows usually comes from each of the following.
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17 - 1 Statement of Cash Flows 87.Starting with net income and adjusting it for items that affected reported net income but which did not affect cash is called the a.direct method. b.indirect method. c.working capital method. d.cost-benefit method. 88.In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during.
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18 - 1 Financial Statement Analysis 87.Trading on the equity (leverage) refers to the a.amount of working capital. b.amount of capital provided by owners. c.use of borrowed money to increase the return to owners. d.number of times interest is earned. 88.The current assets of Myers Company are $250,000. The current liabilities are $100,000. The current ratio expressed.
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18 - 1 Financial Statement Analysis 157.A loss on the write down of obsolete inventory should be reported as a."other expenses and losses." b.part of discontinued operations. c.an operating expense. d.an extraordinary item. 158.If an item meets one (but not both) of the criteria for an extraordinary item, it a.only needs to be disclosed in the footnotes of.
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17 - 1 Statement of Cash Flows Ex. 182 The current sections of Donny Inc.'s balance sheets at December 31, 2013 and 2014, are presented here. Donny's net income for 2014 was $203,000. Depreciation expense was $25,000.    2014    2013 Current assets     Cash$115,000$99,000     Accounts receivable105,00089,000     Inventory 154,000 172,000     Prepaid expense    27,000   21,000            Total current.
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18 - 1 Financial Statement Analysis 137.The following financial statement information is available for Buil Corporation: 2014      2013 Inventory$  44,000$  43,000 Current assets80,000106,000 Total assets432,000358,000 Current liabilities25,00036,000 Total liabilities102,00088,000 The current ratio for 2014 is a..31:1. b.3.2:1. c.1.5:1. d.4.24:1. 138.The following financial statement information is available for James Corporation: 2014       2013 Net sales$780,000$697,000 Cost of goods sold406,000377,000 Net income120,00080,000 Tax expense48,00029,000 Interest expense14,00014,000 The profit margin ratio for 2014.
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17 - 1 Statement of Cash Flows Set 2 — Direct Method a211.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.
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17 - 1 Statement of Cash Flows Ex. 176 Plexis Company reported net income of $148,000. For 2014, depreciation was $45,000, and the company reported a gain on sale of investments of $12,000. Accounts receivable increased $25,000 and accounts payable decreased $23,000. Instructions Compute net cash provided by operating activities using the indirect method. Ex. 177 Assuming.
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18 - 1 Financial Statement Analysis 107.An aircraft company would most likely have a.a high inventory turnover. b.low profit margin. c.high volume. d.a low inventory turnover. 108.Net sales are $8,000,000, beginning total assets are $2,500,000, and the asset turnover is 4.0 times. What is the ending total asset balance? a.$2,000,000 b.$1,500,000 c.$2,500,000 d.$2,500,000 109.Earnings per share is calculated a.only for common stock. b.only for.
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17 - 1 Statement of Cash Flows a127.Lager Company has other operating expenses of $260,000. There has been an increase in prepaid expenses of $20,000 during the year, and accrued liabilities are $15,000 lower than in the prior period. Using the direct method of reporting cash flows from operating activities, what were.
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18 - 1 Financial Statement Analysis MULTIPLE CHOICE QUESTIONS 37.Which one of the following is primarily interested in the liquidity of a company? a.Federal government b.Stockholders c.Long-term creditors d.Short-term creditors 38.Which one of the following is not a characteristic generally evaluated in analyzing financial statements? a.Liquidity b.Profitability c.Marketability d.Solvency 39.In analyzing the financial statements of a company, a single item on the financial.
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17 - 1 Statement of Cash Flows BE 167 Doctor Company prepared the tabulation below at December 31, 2012. Net Income........................................................$307,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense, $32,000..................................._______ Decrease in accounts receivable, $50,000..........................._______ Increase in inventory, $12,000...................................._______ Decrease in accounts payable, $8,600.............................._______ Increase in income taxes payable, $1,500..........................._______ Loss on sale of land,.
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17 - 1 Statement of Cash Flows Ex. 183 Wayne Company reported net income of $265,000  for 2014. Wayne also reported depreciation expense of $45,000 and a loss of $8,000 on the sale of equipment. The comparative balance sheet shows a decrease in accounts receivable of $15,000 for the year, a $17,000 increase.
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17 - 1 Statement of Cash Flows Ex. 179 A comparative balance sheet for Halpern Corporation is presented below: HALPERN CORPORATION Comparative Balance Sheet     2014     2013  Assets Cash$  36,000$  31,000 Accounts receivable (net)70,00060,000 Prepaid insurance25,00017,000 Land18,00040,000 Equipment70,00060,000 Accumulated depreciation   (20,000)   (13,000) Total Assets$199,000$195,000 Liabilities and Stockholders' Equity Accounts payable$  11,000$   6,000 Bonds payable27,00019,000 Common stock140,000115,000 Retained earnings    21,000    55,000 Total liabilities and stockholders' equity$199,000$195,000 Additional information: 1.Net loss for 2014 is.
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17 - 1 Statement of Cash Flows aEx. 189 Dense Company's income statement showed revenues of $275,000 and operating expenses of $135,000. Accounts receivable decreased by $40,000 and accounts payable increased by $35,000 during the year. Instructions Compute (a) cash receipts from customers and (b) cash payments for operating expenses using the direct method. aEx..
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17 - 1 Statement of Cash Flows a137.Christine Company had an increase in inventory of $55,000. The cost of goods sold was $95,000. There was a $6,000 decrease in accounts payable from the prior period. What were Thomas’ cash payments to suppliers? a.$156,000 b.$61,000 c.$144,000 d.$101,000 a138.Which of the following items does not appear in the statement.
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18 - 1 Financial Statement Analysis 147.Beta’s Bunny Barn has experienced a $80,000 loss due to tornado damage to its inventory. Tornados have never before occurred in this area. Assuming that the company’s tax rate is 30%, what amount will be reported for this loss on the income statement? a.$80,000 b.$56,000 c.$24,000 d.$72,000 148.Flite Company reported income.
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17 - 1 Statement of Cash Flows MATCHING Set 1 — Indirect Method 210.For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method. A.Added to net income B.Deducted from net income C.Cash outflow—investing activity D.Cash inflow—investing activity E.Cash outflow—financing activity F.Cash.
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17 - 1 Statement of Cash Flows EXERCISES Ex. 171 Classify each of the following as a(n): A.Operating Activity B.Investing Activity C.Financing Activity _____1Issuance of bonds. _____2.Sale of equipment. _____3.Amortization expense. _____4.Purchase of treasury stock. _____5.Receipt of dividends on investment. _____6.Purchase of land. Ex. 172 Selected transactions of Alton Company are listed below.               1.Common stock is sold for cash above par value.               2.Bonds payable are.
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17 - 1 Statement of Cash Flows Ex. 186 Miroz Corporation's comparative balance sheets are presented below. MIROZ CORPORATION Comparative Balance Sheets December 31     2014     2013 Cash$ 18,700$ 22,700 Accounts receivable 24,70022,300 Investments25,00016,000 Equipment59,00070,000 Accumulated depreciation  (14,500) (10,000)      Total$112,900$121,000 Accounts payable $  13,600$11,100 Bonds payable      6,000  30,000 Common stock  50,00045,000 Retained earnings    43,300    34,900     Total $112,900$121,000 Additional information: 1.Net income was $17,700. Dividends declared and paid.
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17 - 1 Statement of Cash Flows Ex. 178 A comparative balance sheet for Rocker Company appears below: ROCKER COMPANY Comparative Balance Sheet Dec. 31, 2014Dec. 31, 2013 Assets Cash$  34,000$11,000 Accounts receivable18,00013,000 Inventory25,00017,000 Prepaid expenses6,0009,000 Long-term investments-0-17,000 Equipment60,00033,000 Accumulated depreciation—equipment  (20,000)(15,000) Total assets$123,000$85,000 Liabilities and Stockholders' Equity Accounts payable$  17,000$  7,000 Bonds payable36,00045,000 Common stock40,00023,000 Retained earnings    30,000  10,000 Total liabilities and stockholders' equity$123,000$85,000 Additional information: 1.Net income for the year ending.
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18 - 1 Financial Statement Analysis 77.Turnbull Department Store had net credit sales of $18,000,000 and cost of goods sold of $15,000,000 for the year. The average inventory for the year amounted to $2,500,000. Inventory turnover for the year is a.7.2 times. b.15 times. c.6 times. d.1.5 times. 78.Turnbull Department Store had net credit sales of $18,000,000.
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17 - 1 Statement of Cash Flows aEx. 192 The income statement of Reagan Inc. for the year ended December 31, 2014, reported the following condensed information: Service revenue$700,000 Operating expenses  340,000 Income from operations360,000 Income tax expense    50,000 Net income$310,000 Roman's balance sheet contained the following comparative data at December 31:    2014   2013 Accounts receivable$75,000$45,000 Accounts payable40,00050,000 Income taxes payable6,0004,000 Reagan has.
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18 - 1 Financial Statement Analysis 97.Nord Company had $375,000 of current assets and $150,000 of current liabilities before borrowing $70,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on Nord Company's current ratio? a.The ratio remained unchanged. b.The change in the current ratio cannot be determined. c.The.
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18 - 1 Financial Statement Analysis 47.In analyzing financial statements, horizontal analysis is a a.requirement. b.tool. c.principle. d.theory. 48.Horizontal analysis is also called a.linear analysis. b.vertical analysis. c.trend analysis. d.common size analysis. 49.Vertical analysis is also known as a.perpendicular analysis. b.common size analysis. c.trend analysis. d.straight-line analysis. 50.In ratio analysis, the ratios are never expressed as a a.rate. b.negative figure. c.percentage. d.simple proportion. 51.The formula for horizontal analysis of changes since the.
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17 - 1 Statement of Cash Flows 117.The statement of cash flows will not provide insight into a.why dividends were not increased. b.whether cash flow is greater than net income. c.the exact proceeds of a future bond issue. d.how the retirement of debt was accomplished. 118.Which of the following transactions would not be classified as a financing.
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18 - 1 Financial Statement Analysis TRUE-FALSE STATEMENTS 1.Intracompany comparisons of the same financial statement items can often detect changes in financial relationships and significant trends. 2.Calculating financial ratios is a financial reporting requirement under generally accepted accounting principles. 3.Measures of a company's liquidity are concerned with the frequency and amounts of dividend payments. 4.Analysis of.
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17 - 1 Statement of Cash Flows BRIEF EXERCISES BE 161 Selected transactions for the Ecker Company are listed below.               1.Collected accounts receivable.               2.Declared and paid dividends on common stock.               3.Sold long-term investments for cash.               4.Issued stock for equipment.               5.Repaid five year note payable.               6.Paid employee wages.               7.Converted bonds payable to common stock.               8.Acquired.
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17 - 1 Statement of Cash Flows aEx. 194 The financial statements of Lowz Company appear below: LOWZ COMPANY Comparative Balance Sheet December 31     2014     2013  Assets Cash$  36,000$  23,000 Accounts receivable25,00034,000 Merchandise inventory32,00015,000 Property, plant, and equipment50,00078,000 Accumulated depreciation   (21,000)   (24,000) Total$122,000$126,000 Liabilities and Stockholders' Equity Accounts payable$  18,000$  23,000 Income taxes payable9,0008,000 Bonds payable8,00033,000 Common stock28,00024,000 Retained earnings    59,000    38,000 Total$122,000$126,000 LOWZ COMPANY Income Statement For the Year Ended December 31,.
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17 - 1 Statement of Cash Flows 107.The following data are available for Sampson Corporation. Net income$200,000 Depreciation expense60,000 Dividends paid90,000 Loss on sale of land15,000 Decrease in accounts receivable30,000 Decrease in accounts payable45,000 Net cash provided by operating activities is: a.$140,000. b.$260,000. c.$160,000. d.$240,000. 108.The following data are available for Alamo Corporation. Sale of land$225,000 Sale of equipment $130,000 Issuance of common stock140,000 Purchase of equipment 70,000 Payment.
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17 - 1 Statement of Cash Flows +Ex. 195 Condensed financial data of Drake Company appear below: DRAKE COMPANY Comparative Balance Sheet December 31    2014   2013 Assets Cash$  41,000$  35,000 Accounts receivable75,00053,000 Inventories120,000132,000 Prepaid expenses19,00025,000 Investments100,00075,000 Plant assets325,000250,000 Accumulated depreciation  (65,000)  (60,000) Total$615,000$510,000 Liabilities and Stockholders' Equity Accounts payable$  93,000$  75,000 Accrued expenses payable29,00024,000 Bonds payable120,000160,000 Common stock275,000170,000 Retained earnings  98,000    81,000 Total$615,000$510,000 DRAKE COMPANY Income Statement For the Year Ended December 31, 4 Sales$450,000 Less: Cost of.
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18 - 1 Financial Statement Analysis 167.What type of ratios best measure the short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash? a.Leverage b.Solvency c.Profitability d.Liquidity 168.The acid-test ratio is also known as the a.current ratio. b.quick ratio. c.fast ratio. d.times interest earned ratio. 169.The debt to assets ratio a.is a solvency ratio. b.is computed by.
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17 - 1 Statement of Cash Flows 97.Which of the following adjustments to convert net income to net cash provided by operating activities is incorrect? Add to Net IncomeDeduct from Net Income a.Accounts Receivabledecreaseincrease b.Prepaid Expensesincreasedecrease c.Inventorydecreaseincrease d.Accounts Payableincreasedecrease 98.Which of the following adjustments to convert net income to net cash provided by operating activities is not added.
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17 - 1 Statement of Cash Flows Ex. 185 Planner Corporation's comparative balance sheets are presented below. PLANNER CORPORATION Comparative Balance Sheets December 31    2014    2013 Cash$ 21,570$ 10,700 Accounts receivable 18,20023,400 Land18,00026,000 Building70,00070,000 Accumulated depreciation  (15,000) (10,000)      Total$112,770$120,100 Accounts payable$  12,370$31,100 Common stock 75,00069,000 Retained earnings    25,400   20,000     Total$112,770$120,100 Additional information: 1.Net income was $27,900. Dividends declared and paid were $22,500. 2.All other changes in.
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17 - 1 Statement of Cash Flows Ex. 181 Towson Company prepared the tabulation below at December 31, 2014. Net Income........................................................$340,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense, $43,000..................................._______ Increase in accounts receivable, $50,000............................_______ Decrease in inventory, $13,000..................................._______ Amortization of patent, $4,000...................................._______ Increase in accounts payable, $5,600.............................._______ Decrease in interest receivable, $7,000............................._______ Increase in prepaid.
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18 - 1 Financial Statement Analysis 67.In performing a vertical analysis, the base for sales revenues on the income statement is a.net sales. b.sales. c.net income. d.cost of goods available for sale. 68.In performing a vertical analysis, the base for sales returns and allowances is a.sales. b.sales discounts. c.net sales. d.total revenues. 69.In performing a vertical analysis, the base for cost of.
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18 - 1 Financial Statement Analysis 127.The following information pertains to Rural Company. Assume that all balance sheet amounts represent both average and ending balance figures.  Assume that all sales were on credit. Assets Cash and short-term investments$  40,000 Accounts receivable (net)30,000 Inventory25,000 Property, plant and equipment  215,000 Total Assets$310,000 Liabilities and Stockholders’ Equity Current liabilities$  60,000 Long-term liabilities75,000 Stockholders’ equity—common  175,000 Total.
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18 - 1 Financial Statement Analysis 31.The three basic tools of analysis are horizontal analysis, vertical analysis, and ratio analysis. 32.A percentage change can be computed only if the base amount is zero or positive. 33.In vertical analysis, the base amount in an income statement is usually net sales. 34.Profitability ratios measure the ability of.
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17 - 1 Statement of Cash Flows SHORT-ANSWER ESSAY QUESTIONS S-A E 212 Distinguish among the three types of activities reported in the statement of cash flows The three activities are: S-A E 213 Why is the statement of cash flows useful? S-A E 214 The statement of cash flows is the only required financial statement that is not.
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18 - 1 Financial Statement Analysis 21.Inventory turnover measures the number of times on the average the inventory was sold during the period. 22.Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness. 23.The rate of return on total assets will be greater than the rate of return on common stockholders'.
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