C214 topic 3 Question and answers
verified to pass 2026
The sum of CFO + CFI + CFF is equal to: - correct answer ✔The change in cash during the period
Which of the following is true with respect to CFO? - correct answer ✔An increase in inventory
indicates a reduction in CFO
Free Cash Flow (FCF) is different from Cash Flows from Operations (CFO) because FCF: - correct answer
✔Represents cash flow after required investment
Balken, Inc. reports the following on their most recent financial statements:
Change in accounts payable: $50
Change in notes payable: $100
Change in long-term debt: $200
Change in retained earnings: -$120
Net income: $170
What is Balken's CFF for the period? - correct answer ✔$10
CFF = change in notes payable + change in long-term debt - dividends (assuming no other relevant
changes); hence, CFF = 100 + 200 -Dividends. The change in RE = net income - dividends; so, -120 = 170 -
dividends; thus, dividends = 290. Finally, CFF = 100 +200 - 290 = 10.
The Statement of Cash Flows is not useful when assessing the financial health of a firm due to the
impact of accrual accounting. - correct answer ✔The answer is false. In order to understand the health
of a company, you must understand how the firm generates and expends cash. The impacts of accrual
accounting are seen most in relation to net income.
verified to pass 2026
The sum of CFO + CFI + CFF is equal to: - correct answer ✔The change in cash during the period
Which of the following is true with respect to CFO? - correct answer ✔An increase in inventory
indicates a reduction in CFO
Free Cash Flow (FCF) is different from Cash Flows from Operations (CFO) because FCF: - correct answer
✔Represents cash flow after required investment
Balken, Inc. reports the following on their most recent financial statements:
Change in accounts payable: $50
Change in notes payable: $100
Change in long-term debt: $200
Change in retained earnings: -$120
Net income: $170
What is Balken's CFF for the period? - correct answer ✔$10
CFF = change in notes payable + change in long-term debt - dividends (assuming no other relevant
changes); hence, CFF = 100 + 200 -Dividends. The change in RE = net income - dividends; so, -120 = 170 -
dividends; thus, dividends = 290. Finally, CFF = 100 +200 - 290 = 10.
The Statement of Cash Flows is not useful when assessing the financial health of a firm due to the
impact of accrual accounting. - correct answer ✔The answer is false. In order to understand the health
of a company, you must understand how the firm generates and expends cash. The impacts of accrual
accounting are seen most in relation to net income.
