WGU C213 Topic Five Study Guide
Exam with Questions and Correct
Answers Latest Updated 2026-2027
GRADED A+
Cash flows are partitioned into three categories... - CORRECT ANSWERS-
operating (most important)
investing (second most important)
financing (third most important)
(also have to include non-cash investing and financing transactions)
the statement of cash flows provides what? - CORRECT ANSWERS-information
that is not readily apparent by looking at just the balance sheet and the income
statement
Operating cash flow is particularly useful in selected cases when net income
does not give an accurate reflection of a company's performance.
how do you prepare a statement of cash flows? - CORRECT ANSWERS-One
simply scans the list of cash transactions and sorts them into operating,
investing, and financing items.
how to prepare a statement of cash flows when detailed cash flow information
is not available? - CORRECT ANSWERS-a statement of cash flows can be
prepared using knowledge of how the three primary financial statements
articulate. Operating cash flow can be reported using either the direct or the
indirect method.
6 step process
statement of cash flows - CORRECT ANSWERS-summarizes a company's cash
flows for a period of time
reports cash inflow and cash outflow during a period, with an emphasis on the
amount of CASH GENERATED BY OPERATIONS
income statement and statement of cash flows are not replacements for each
other - CORRECT ANSWERS-each have a different purpose
, income statement measures the results of operations for a period of time and
the statement of cash flows reports the period's transactions and events in
terms of their impact on cash
the birth of the statement of cash flows - CORRECT ANSWERS-created in the
US in 1988
why was the statement of cash flows created? - CORRECT ANSWERS-
sometimes earnings fail, everything is one page, its a powerful forecasting tool
sometimes earnings fail (net income) - CORRECT ANSWERS-- big loss
scenario: earnings are too pessimistic (makes things look worse than they are)
- rapid growth scenario: earnings are too optimistic (if something happens, a lot
of other things need to be done. faster growth = harder things will be)
- reality check scenario: earnings are too "iffy" (not as reliable)
everything is on one page - CORRECT ANSWERS-operating activities (things
we do routinely every day, the reason we are in business)
investing activities (expanding the productive capacity of the business)
financing activities (getting the cash for a new expansion and distributing cash
to those who have provided financing in the past)
forecasting tool - CORRECT ANSWERS-imposes practical numerical discipline
on exciting entrepreneurial plans for the future
(teaching tool) proper understanding of the statement of cash flows links the
balance sheet and the income statement through an understanding of business
events
pro forma - CORRECT ANSWERS-a predication "forecast" of what the actual
cash flow statement will look like in future years if the operating, investing, and
financial plans are implemented
if you don't like the implications of the forecast, you must change one or more
of the assumptions
The statement of cash flows replaces the
Balance sheet
Statement of financial position
Income statement
None of these - CORRECT ANSWERS-None of these
Exam with Questions and Correct
Answers Latest Updated 2026-2027
GRADED A+
Cash flows are partitioned into three categories... - CORRECT ANSWERS-
operating (most important)
investing (second most important)
financing (third most important)
(also have to include non-cash investing and financing transactions)
the statement of cash flows provides what? - CORRECT ANSWERS-information
that is not readily apparent by looking at just the balance sheet and the income
statement
Operating cash flow is particularly useful in selected cases when net income
does not give an accurate reflection of a company's performance.
how do you prepare a statement of cash flows? - CORRECT ANSWERS-One
simply scans the list of cash transactions and sorts them into operating,
investing, and financing items.
how to prepare a statement of cash flows when detailed cash flow information
is not available? - CORRECT ANSWERS-a statement of cash flows can be
prepared using knowledge of how the three primary financial statements
articulate. Operating cash flow can be reported using either the direct or the
indirect method.
6 step process
statement of cash flows - CORRECT ANSWERS-summarizes a company's cash
flows for a period of time
reports cash inflow and cash outflow during a period, with an emphasis on the
amount of CASH GENERATED BY OPERATIONS
income statement and statement of cash flows are not replacements for each
other - CORRECT ANSWERS-each have a different purpose
, income statement measures the results of operations for a period of time and
the statement of cash flows reports the period's transactions and events in
terms of their impact on cash
the birth of the statement of cash flows - CORRECT ANSWERS-created in the
US in 1988
why was the statement of cash flows created? - CORRECT ANSWERS-
sometimes earnings fail, everything is one page, its a powerful forecasting tool
sometimes earnings fail (net income) - CORRECT ANSWERS-- big loss
scenario: earnings are too pessimistic (makes things look worse than they are)
- rapid growth scenario: earnings are too optimistic (if something happens, a lot
of other things need to be done. faster growth = harder things will be)
- reality check scenario: earnings are too "iffy" (not as reliable)
everything is on one page - CORRECT ANSWERS-operating activities (things
we do routinely every day, the reason we are in business)
investing activities (expanding the productive capacity of the business)
financing activities (getting the cash for a new expansion and distributing cash
to those who have provided financing in the past)
forecasting tool - CORRECT ANSWERS-imposes practical numerical discipline
on exciting entrepreneurial plans for the future
(teaching tool) proper understanding of the statement of cash flows links the
balance sheet and the income statement through an understanding of business
events
pro forma - CORRECT ANSWERS-a predication "forecast" of what the actual
cash flow statement will look like in future years if the operating, investing, and
financial plans are implemented
if you don't like the implications of the forecast, you must change one or more
of the assumptions
The statement of cash flows replaces the
Balance sheet
Statement of financial position
Income statement
None of these - CORRECT ANSWERS-None of these
