Part 2 : 09/06/13 00:22:02 Question 1 - CMA 1295 P2 Q4 - Basic Financial Statement Analysis Royce Company had the following

transactions during the fiscal year ended December 31, 2011: Accounts receivable decreased from $115,000 on December 31, 2010 to $100,000 on December 31, 2011. Royce's board of directors declared dividends on December 31, 2011 of $.05 per share on the 2.8 million shares outstanding, payable to shareholders of record on January 31, 2012. The company did not declare or pay dividends for fiscal 2010. Sold a truck with a net book value of $7,000 for $5,000 cash, reporting a loss of $2,000. Paid interest to bondholders of $780,000. The cash balance was $106,000 on December 31, 2010 and $284,000 on December 31, 2011. The total of cash provided/used by operating activities plus cash provided/used by investing activities plus cash provided/used by financing activities is A. Cash provided of $284,000. B. Cash provided of $178,000. C. Equal to net income reported for fiscal year ended December 31, 2011. D. Cash used of $582,000.

Question 2 - CMA 1295 P2 Q5 - Basic Financial Statement Analysis A statement of cash flows is intended to help users of financial statements A. Evaluate a firm's economic resources and obligations. B. Evaluate a firm's liquidity, solvency, and financial flexibility. C. Determine a firm's components of income from operations. D. Determine whether insiders have sold or purchased the firm's stock.

Question 3 - CIA 590 IV.32 - Basic Financial Statement Analysis The major distinction between the multiple-step and single-step income statement formats is the separation of: A. Operating and non-operating data. B. The effect on income taxes of extraordinary items and the effect on income taxes of profit or loss from ordinary activities. C. Cost of goods sold expense and administrative expenses. D. Income tax expense and administrative expenses.

Question 4 - CIA 1195 P4 Q34 - Basic Financial Statement Analysis In the statement of cash flows, the payment of common share dividends appears in the _____ activities section as a _____ of cash. A. Investing, Source B. Operating, Source C. Financing, Use D. Investing, Use

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Question 5 - CMA 0697 P2 Q2 - Basic Financial Statement Analysis When preparing the statement of cash flows, companies are required to report separately as operating cash flows all of the following except A. Interest paid on the company's bonds. B. Cash dividends paid on the company's stock. C. Cash collected from customers. D. Interest received on investments in bonds.

Question 6 - CMA 1295 P2 Q2 - Basic Financial Statement Analysis Royce Company had the following transactions during the fiscal year ended December 31, 2005: Accounts receivable decreased from $115,000 on December 31, 2004 to $100,000 on December 31, 2005. Royce's board of directors declared dividends on December 31, 2005 of $.05 per share on the 2.8 million shares outstanding, payable to shareholders of record on January 31, 2006. The company did not declare or pay dividends for fiscal 2004. Sold a truck with a net book value of $7,000 for $5,000 cash, reporting a loss of $2,000. Paid interest to bondholders of $780,000. The cash balance was $106,000 on December 31, 2004 and $284,000 on December 31, 2005. Royce Company uses the direct method to prepare its statement of cash flows at December 31, 2005. The interest paid to bondholders is reported in the A. Investing section, as a use or outflow of cash. B. Operating section, as a use or outflow of cash. C. Debt section, as a use or outflow of cash. D. Financing section, as a use or outflow of cash.

Question 7 - ICMA 10.P2.096 - Basic Financial Statement Analysis Barber Company has recorded the following payments for the current period. Interest paid on bank loan $300,000 Dividends paid to Barber shareholders 200,000 Repurchase of Barber Company stock 400,000 The amount to be shown in the Financing Activities section of Barber's Cash Flow Statement should be A. $500,000 B. $300,000 C. $600,000 D. $900,000

Question 8 - ICMA 10.P2.015 - Basic Financial Statement Analysis

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Part 2 : 09/06/13 00:22:02 Which one of the following should be classified as an operating activity on the statement of cash flows? A. A decrease in accounts payable during the year. B. The purchase of additional equipment needed for current production. C. The payment of a cash dividend from money arising from current operations. D. An increase in cash resulting from the issuance of previously authorized common stock.

Question 9 - ICMA 10.P2.009 - Basic Financial Statement Analysis All of the following are elements of an income statement except A. shareholders' equity. B. expenses. C. gains and losses. D. revenue.

Question 10 - CMA 1288 P4 Q19 - Basic Financial Statement Analysis Which of the following items is specifically included in the statement of cash flows? A. Operating and nonoperating cash flow information. B. Purchasing a building by giving a mortgage to the seller. C. Conversion of debt to equity. D. Acquiring an asset through a capital lease.

Question 11 - ICMA 10.P2.002 - Basic Financial Statement Analysis The financial statements included in the annual report to the shareholders are least useful to which one of the following? A. Stockbrokers. B. Bankers preparing to lend money. C. Managers in charge of operating activities. D. Competing businesses.

Question 12 - ICMA 10.P2.003 - Basic Financial Statement Analysis Which one of the following would result in a decrease to cash flow in the indirect method of preparing a statement of cash flows? A. Proceeds from the issuance of common stock. B. Amortization expense. C. Decrease in income taxes payable. D. Decrease in inventories.

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Question 13 - CMA 0693 P2 Q13 - Basic Financial Statement Analysis With respect to the content and form of the statement of cash flows, A. The reconciliation of the net income to net operating cash flow need not be presented when using the direct method. B. The indirect method adjusts ending retained earnings to reconcile it to net cash flows from operations. C. The pronouncements covering the cash flow statement encourage the use of the indirect method. D. The direct method of reporting cash flows from operating activities includes disclosing the major classes of gross cash receipts and gross cash payments.

Question 14 - ICMA 10.P2.005 - Basic Financial Statement Analysis When using the statement of cash flows to evaluate a companys continuing solvency, the most important factor to consider is the cash A. flows from (used for) financing activities. B. flows from (used for) operating activities. C. balance at the end of the period. D. flows from (used for) investing activities.

Question 15 - CMA 688 4.17 - Basic Financial Statement Analysis In financial statement analysis, expressing all financial statement items as a percentage of base-year figures is called A. Ratio analysis. B. Horizontal common size analysis. C. Vertical common size analysis. D. Market growth analysis.

Question 16 - ICMA 10.P2.016 - Basic Financial Statement Analysis All of the following are limitations to the information provided on the statement of financial position except the A. judgments and estimates used regarding the collectibility, salability, and longevity of assets. B. omission of items that are of financial value to the business such as the worth of the employees. C. quality of the earnings reported for the enterprise. D. lack of current valuation for most assets and liabilities.

Question 17 - CMA 1296 P2 Q22 - Basic Financial Statement Analysis Which one of the following transactions should be classified as a financing activity in a statement of cash flows? A. Sale of trademarks. B. Purchase of equipment. C. Payment of interest on a mortgage note. (c) HOCK international, page 4

Part 2 : 09/06/13 00:22:02 D. Purchase of treasury stock.

Question 18 - CIA 1192 P4 Q32 - Basic Financial Statement Analysis A reader of a statement of cash flows wishes to analyze the major classes of cash receipts and cash payments from operating activities. Which methods of reporting cash flows from operating activities will supply that information? A. Neither method. B. Only the direct method. C. Both the direct and indirect methods. D. Only the indirect method.

Question 19 - ICMA 10.P2.012 - Basic Financial Statement Analysis The sale of available-for-sale securities should be accounted for on the statement of cash flows as a(n) A. operating activity. B. financing activity. C. investing activity. D. noncash investing and financing activity.

Question 20 - CMA 1295 2.21 - Basic Financial Statement Analysis In assessing the financial prospects for a firm, financial analysts use various techniques. An example of vertical, common-size analysis is A. Advertising expense increased by 3% over the previous year. B. An assessment of the relative stability of a firm's level of vertical integration. C. Advertising expense is 4% of sales. D. A comparison in financial ratio form between two or more firms in the same industry.

Question 21 - CMA 1296 P2 Q21 - Basic Financial Statement Analysis All of the following should be classified under the operating section in a statement of cash flows except a A. Depreciation expense. B. Purchase of land and building in exchange for a long-term note. C. Decrease in prepaid insurance. D. Decrease in inventory.

Question 22 - CMA 1293 P2 Q29 - Basic Financial Statement Analysis With respect to the statement of cash flows, the FASB Accounting Standards Codification classifies cash receipts and

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Part 2 : 09/06/13 00:22:02 cash payments as arising from operating, investing, and financing activities. All of the following should be classified as investing activities except A. Cash inflows from the sale of a manufacturing plant. B. Cash outflows to lenders for interest. C. Cash inflows from the sale of bonds of other entities. D. Cash outflows to purchase manufacturing equipment.

Question 23 - ICMA 10.P2.001 - Basic Financial Statement Analysis Gordon has had the following financial results for the last four years. Year 1 Year 2 Year 3 Year 4 Sales $1,250,000$1,300,000$1,359,000$1,400,000 Cost of goods sold 750,000 785,000 825,000 850,000 Gross profit $ 500,000$ 515,000$ 534,000$ 550,000 Inflation factor 1.00 1.03 1.07 1.10

Gordon has analyzed these results using vertical common-size analysis to determine trends. The performance of Gordon can best be characterized by which one of the following statements? A. The common-size trend in sales is increasing and is resulting in an increasing trend in the common-size gross profit margin. B. The common-size trend in cost of goods sold is decreasing which is resulting in an increasing trend in the common-size gross profit margin. C. The common-size gross profit percentage has decreased as a result of an increasing common-size trend in cost of goods sold. D. The increased trend in the common-size gross profit percentage is the result of both the increasing trend in sales and the decreasing trend in cost of goods sold.

Question 24 - ICMA 10.P2.004 - Basic Financial Statement Analysis The statement of shareholders equity shows a A. reconciliation of the beginning and ending balances in shareholders equity accounts. B. listing of all shareholders equity accounts and their corresponding dollar amounts. C. reconciliation of the beginning and ending balances in the Retained Earnings account. D. computation of the number of shares outstanding used for earnings per share calculations.

Question 25 - ICMA 10.P2.011 - Basic Financial Statement Analysis All of the following are classifications on the Statement of Cash Flows except A. equity activities. B. operating activities. C. investing activities. D. financing activities.

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Question 26 - CMA 0695 P2 Q21 - Basic Financial Statement Analysis With respect to the statement of cash flows, the FASB Accounting Standards Codification classifies business transactions into operating, investing, and financing activities. Which one of the following transactions should not be classified as a financing activity? A. Issuance of common stock. B. Payment of dividends. C. Purchase of treasury stock. D. Income tax refund.

Question 27 - CMA 1296 P2 Q23 - Basic Financial Statement Analysis All of the following should be classified as investing activities in the statement of cash flows except A. Cash inflows from the sale of a manufacturing plant. B. Cash outflows to purchase manufacturing equipment. C. Cash outflows to creditors for interest. D. Cash inflows from the sale of bonds of other entities.

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Question 1 - CMA 1295 P2 Q4 - Basic Financial Statement Analysis A. This is the ending cash balance. B. This question is made simple by the fact that the beginning and ending cash balances are given. Since the beginning cash was $106,000 and the ending balance was $284,000, we know that the cash increased by $178,000 during the year. All transactions that involved cash will be classified as either operating, investing or financing activities, so this question is actually just asking what the change in the cash balance was during the year, which is the ending cash balance minus the beginning cash balance. The correct answer cannot be calculated using the other amounts given, because not all of the transactions that affected cash have been given. The amounts given net to a cash outflow of $760,000. Since that does not reconcile to the amount of change in the cash balance (a net cash inflow of $178,000), we know that not all the transctions that affected cash are given. C. Net income must be adjusted for noncash items in order to determine the net change in the cash position for the period. D. This is the decrease in accounts receivable (+$15,000) plus the proceeds from the truck sale (+$5,000) minus the interest paid to bondholders ($780,000) plus the increase in the cash balance (+$178,000). This is incorrect because: 1. The question asks for the total of cash provided/used by operating activities plus cash provided/used by investing activities plus cash provided/used by financing activities. All transactions that involved cash will be classified as either operating, investing or financing activities, so this question is actually just asking what the change in the cash balance was during the year. In the calculation above, the amount of change in the cash balance (ending cash balance of $284,000 beginning cash balance of $106,000) is included as one component of the change in the cash balance, which makes no sense. The beginning and ending cash balances can be used only to calculate the net cash used or provided during the period. The amount of change in the cash balance is the number that any statement of cash flows must reconcile to. 2. The correct answer cannot be calculated using the amounts given, because not all of the transactions that affected cash have been given. The amounts given net to a cash outflow of $760,000. Since that does not reconcile to the amount of change in the cash balance (a net cash inflow of $178,000), we know that not all the transctions that affected cash are given.

Question 2 - CMA 1295 P2 Q5 - Basic Financial Statement Analysis A. The balance sheet provides information about a firm's economic resources and obligations. B. The statement of cash flows provides information about the sources and uses of cash. This statement, when used with other financial statements will assist users in evaluating a firm's liquidity, solvency and financial flexibility. This choice is not the best definition of the uses of the statement of cash flows, but it is a better answer than the other choices. C. The income statement helps users determine a firm's components of income from operations. D. The notes to the financial statements will provide information as to whether or not insiders have sold or purchased the firm's stock.

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Question 3 - CIA 590 IV.32 - Basic Financial Statement Analysis A. The major distinction between the multiple-step and single-step income statement formats is how operating and non-operating data is separated. In the single-step format all revenues and gains are put together and all expenses and losses are reported together. In the multiple-step format, individual classes of operating revenues and expenses are reported and after this, all other gains and losses are reported. B. The effect of income taxes on profit from ordinary activities will be the same for both formats. Extraordinary items will be reported separately. C. There is a separation of cost of goods sold expense and administrative expenses under both formats. D. There is a separation of income tax expenses and administrative expenses under both formats.

Question 4 - CIA 1195 P4 Q34 - Basic Financial Statement Analysis A. The payment of dividends is a financing activity and since it is the payment of dividends, it is a use of cash. See the correct answer for a complete explanation. B. The payment of dividends is a financing activity and since it is the payment of dividends, it is a use of cash. See the correct answer for a complete explanation. C. The payment of dividends is classified as a financing activity and because it is the payment of dividends, it is a use of cash. D. The payment of dividends is classified as a financing activity. See the correct answer for a complete explanation.

Question 5 - CMA 0697 P2 Q2 - Basic Financial Statement Analysis A. This is an operating activity. B. Dividends paid is classified as a financing activity in the statement of cash flows. C. This is an operating activity. D. This is an operating activity.

Question 6 - CMA 1295 P2 Q2 - Basic Financial Statement Analysis A. The payment of interest is classified as an operating activity and is a use or outflow of cash. B. The payment of interest is classified as an operating activity and is a use or outflow of cash. C. The payment of interest is classified as an operating activity and is a use or outflow of cash. There is no debt classification on the statement of cash flows. D. The payment of interest is classified as an operating activity and is a use or outflow of cash. (c) HOCK international, page 9

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Question 7 - ICMA 10.P2.096 - Basic Financial Statement Analysis A. This answer results from including interest paid on debt and dividends paid to shareholders in the calculation of cash flows from financing activities. However, interest on debt is classified as a cash flow from operating activities, not as a cash flow from financing activities. And although it is correct to classify dividends paid to shareholders as a financing activity, that is not the only financing activity among those given. B. This answer results from classifying interest paid on debt as the only cash flow from financing activities. However, interest on debt is classified as a cash flow from operating activities, not as a cash flow from financing activities. C. Dividends paid ($200,000) and repurchase of the company's stock as treasury stock ($400,000) are transactions that should be classified as cash flows from financing activities on the company's cash flow statement. Interest on debt is classified as a cash flow from operating activities, not financing activities. D. This answer results from including all of the cash flows given in the calculation of cash flows from financing activities. However, interest on debt is classified as a cash flow from operating activities, not as a cash flow from financing activities.

Question 8 - ICMA 10.P2.015 - Basic Financial Statement Analysis A. Operating activities are generally part of the company's main business activities and central operations. These are essentially items that generate revenues and expenses. When accounts payable decreases, it means cash has been disbursed for operating activities. Thus a decrease in accounts payable during the year should be classified as an operating activity on the statement of cash flows. B. The purchase of additional equipment needed for current production is classified on the statement of cash flows as an investing. Investing activities are those activities that the company undertakes to generate a future profit, or return, such as purchasing fixed assets. C. The payment of a cash dividend is classified on the statement of cash flows as a financing activity, regardless of where the money to pay the dividend came from. Financing activities are the activities that a company undertakes to raise capital to finance the business, and paying a cash dividend is a financing activity. D. An increase in cash resulting from the issuance of previously authorized common stock is classified on the statement of cash flows as a financing activity. Financing activities are the activities that a company undertakes to raise capital to finance the business, and issuing stock raises capital to finance the business.

Question 9 - ICMA 10.P2.009 - Basic Financial Statement Analysis A. This question is asking for the answer choice that is not an element of an income statement. Shareholders' equity is an element of a balance sheet (also called the statement of financial position). B. This question is asking for the answer choice that is not an element of an income statement. Expenses are an element of an income statement.

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Part 2 : 09/06/13 00:22:02 C. This question is asking for the answer choice that is not an element of an income statement. Gains and losses are elements of an income statement. D. This question is asking for the answer choice that is not an element of an income statement. Revenue is an element of an income statement.

Question 10 - CMA 1288 P4 Q19 - Basic Financial Statement Analysis A. Only cash transactions are disclosed in the of the statement of cash flows. This is the only choice that is a cash transaction so this is the correct answer. B. This is a noncash transaction and noncash transactions are recorded in s supplemental schedule at the bottom of the statement of cash flows; they are not reported in the of the statement of cash flows. C. This is a noncash transaction and noncash transactions are recorded in s supplemental schedule at the bottom of the statement of cash flows; they are not reported in the of the statement of cash flows. D. This is a noncash transaction and noncash transactions are recorded in s supplemental schedule at the bottom of the statement of cash flows; they are not reported in the of the statement of cash flows.

Question 11 - ICMA 10.P2.002 - Basic Financial Statement Analysis A. Stockbrokers use financial statements of publicly-traded companies to make recommendations to their clients. B. Bankers use financial statements of both publicly-traded companies and private companies to make loan decisions in response to loan requests from the companies. C. The financial statements included in the annual report to shareholders do not contain enough detail for internal managers in charge of operating activities. Managers need internal reports that give them the details about the effectiveness and the efficiency of operations, so they can make the necessary day-to-day decisions. D. Competing businesses use financial statements of their competitors to analyze how well they are doing versus the competition.

Question 12 - ICMA 10.P2.003 - Basic Financial Statement Analysis A. The issuance of common stock results in an increase to cash, not a decrease. B. Amortization expense is a non-cash transaction that increases expense and decreases net income. Since it is a non-cash transaction, it is added to net income in calculating net cash flow and increases net cash flow from operations. C. A decrease in income taxes payable results from making payment of taxes due. It represents a decrease in cash flow. D. A decrease in inventories represents an increase in cash, not a decrease.

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Part 2 : 09/06/13 00:22:02 Question 13 - CMA 0693 P2 Q13 - Basic Financial Statement Analysis A. This reconciliation is required no matter which method is used. B. The indirect method adjusts net income to calculate the cash flows from operations. C. The FASB does not encourage the use of the indirect method. D. Under the direct method, the statement of cash flows discloses each type of transaction separately. There are individual lines for cash received from customers, cash paid to suppliers, cash paid for rent, cash paid for salaries, and so forth. Under the indirect method, this breakdown by activity is not provided.

Question 14 - ICMA 10.P2.005 - Basic Financial Statement Analysis A. Solvency refers to a firm's ability to cover its liabilities with its assets. Cash flows from and used for financing activities does not help a user evaluate the company's continuing solvency. B. Solvency refers to a firm's ability to cover its liabilities with its assets. If a firm is not able to generate a positive cash flow from its operating activities, it is or soon will be insolvent. Therefore, cash flows from and used for operating activities is the most important factor to consider when using the statement of cash flows to to evaluate a company's continuing solvency. C. Solvency refers to a firm's ability to cover its liabilities with its assets. The cash balance at the end of the period does not help a user evaluate the company's continuing solvency. D. Solvency refers to a firm's ability to cover its liabilities with its assets. Cash flows from and used for investing activities does not help a user evaluate the company's continuing solvency.

Question 15 - CMA 688 4.17 - Basic Financial Statement Analysis A. Ratio analysis is the term that is used to encompass many different elements of financial analysis. It is looking at the relationships between numbers. B. Horizontal common-size analysis occurs when the financial information is presented as a percentage of the company's financial information from a previous period. The current year amounts are stated in comparison to the base period for that company, which is given a value of 100%. C. Vertical, common-size analysis creates financial statements in which each component is measured as a percentage of another element of the financial statements for that same period. For example, all items on the balance sheet are measured as a percentage of total assets and all income statement items are measured as a percentage of total sales. D. Market growth analysis is the process of looking at the whole market in which the company does business to analyze its growth.

Question 16 - ICMA 10.P2.016 - Basic Financial Statement Analysis A. Judgments and estimates are used in determining many of the items reported in the balance sheet. For example, estimates of the amount of receivables the company will collect are used to value the accounts receivable; the expected useful life of fixed assets is used to determine the amount of depreciation; and the companys liability for (c) HOCK international, page 12

Part 2 : 09/06/13 00:22:02 future warranty claims is estimated by projecting the number and the cost of the future claims. Because these are estimates, they are by nature not precise. B. Many assets are not reported on the balance sheet, even though they do have value and will generate future cash flows. Examples of these include the companys employees, or its human resources, its processes and procedures, and its competitive advantages. C. The statement of financial position, or balance sheet, does not report earnings for the enterprise at all. Earnings are reported on the income statement. D. Values of certain assets are measured at historical cost, not market value, replacement cost, or their value to the firm, for the balance sheet. For example, property, plant and equipment are reported on the balance sheet at their historical cost minus accumulated depreciation, although the assets value in use may be significantly greater.

Question 17 - CMA 1296 P2 Q22 - Basic Financial Statement Analysis A. The sale of trademarks would be classified as an investing activity. This is because the trademark is considered to be a long-lived asset. B. This is an investing activity. C. The payment of interest is classified as an operating activity. D. The purchase of treasury shares is classified as a financing activity.

Question 18 - CIA 1192 P4 Q32 - Basic Financial Statement Analysis A. One of the methods of reporting cash flows from operating activities does provide specific information about cash inflows and outflows from specific operating activities. B. Only the direct method provides specific information about the cash inflows or outflows from different operating activities (such as cash received from customers and cash paid to suppliers). C. The indirect method does not provide specific information about cash inflows and outflows from specific operating activities. D. The indirect method does not provide specific information about cash inflows and outflows from specific operating activities.

Question 19 - ICMA 10.P2.012 - Basic Financial Statement Analysis A. The sale of available-for-sale securities is not classified on the statement of cash flows as an operating activity. The sale of trading securities is usually classified as an operating activity on the statement of cash flows. However, some securities are classified as trading securities even though they are not being held for sale in the near term. Cash receipts and cash payments related to trading securities reported at fair value should be classified based on the nature and purpose of the securities. Therefore, the facts and circumstances of the situation need to be evaluated to (c) HOCK international, page 13

Part 2 : 09/06/13 00:22:02 determine whether cash flows from trading securities are to be classified as operating activities or as investing activities. B. Financing activities are the activities that a company undertakes to raise capital to finance the business. The sale of available-for-sale securities is not classified on the statement of cash flows as a financing activity. C. Investing activities are those activities that the company undertakes to generate a future profit, or return, such as purchasing and selling fixed assets, purchasing and selling stock of other companies, purchasing and selling debt instruments, and purchasing and selling available-for-sale or held-to-maturity securities. Therefore, the sale of available-for-sale securities should be classified on the statement of cash flows as an investing activity. According to the FASB Codification, Paragraph 230-10-45-11, "Cash flows from purchases, sales, and maturities of available-for-sale securities shall be classified as cash flows from investing activities and reported gross in the statement of cash flows." D. Noncash investing and financing activities is not a classification on the statement of cash flows but rather an item to be disclosed as a note to the statement. The sale of available-for-sale securities generates cash, so it would not be disclosed as a noncash transaction but instead must be classified in the body of the statement of cash flows.

Question 20 - CMA 1295 2.21 - Basic Financial Statement Analysis A. Vertical, common-size analysis creates financial statements in which each component is measured as a percentage of another element of the financial statements for that same period. A comparison between periods for the same company is not vertical, common-size analysis. This is horizontal, common-size analysis. B. Vertical, common-size analysis creates financial statements in which each component is measured as a percentage of another element of the financial statements for that same period. Vertical integration occurs when a company owns other companies that are suppliers or customers. Vertical integration is not related to vertical, common-size analysis. C. Vertical, common-size analysis creates financial statements in which each component is measured as a percentage of another element of the financial statements for that same period. For example, all items on the balance sheet are measured as a percentage of total assets and all income statement items are measured as a percentage of total sales. Advertising expense being 2% of sales is such an example of vertical, common-size analysis. D. Vertical, common-size analysis creates financial statements in which each component is measured as a percentage of another element of the financial statements for that same period. A comparison between companies within the same industry is not vertical, common-size analysis.

Question 21 - CMA 1296 P2 Q21 - Basic Financial Statement Analysis A. Depreciation expense is an adjustment included in operating activities. B. The purchase of land and building in exchange for a long-term note is reported in the supplemental schedule of noncash investing and financing activities at the end of the statement of cash flows.

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Part 2 : 09/06/13 00:22:02 C. The decrease in the prepaid insurance account is an adjustment included in operating activities. D. The decrease in the inventory account is an adjustment included in operating activities.

Question 22 - CMA 1293 P2 Q29 - Basic Financial Statement Analysis A. Inflows from the sale of a manufacturing plant are classified as an investing activity on the statement of cash flows. B. Cash paid to lenders for interest is classified as an operating activity on the statement of cash flows. C. Inflows from the sale of bonds of other entities are classified as an investing activity on the statement of cash flows. D. Outflows to purchase manufacturing equipment are classified as an investing activity on the statement of cash flows.

Question 23 - ICMA 10.P2.001 - Basic Financial Statement Analysis A. Although the gross profit is increasing, the gross profit margin is not increasing. B. The trend in cost of goods sold is not decreasing. C. To solve this, we need to calculate the percentage of sales represented by COGS and Gross Profit for each of the years and then analyze the trends. Year 1 Year 2 Year 3 Year 4 Sales $1,250,000100.0% $1,300,000100.0% $1,359,000100.0% $1,400,000100.0% COGS 750,000 60.0% 785,000 60.4% 825,000 60.7% 850,000 60.7% Gr. profit $ 500,000 40.0% $ 515,000 39.6% $ 534,000 39.3% $ 550,000 39.3% When we look at the trend, it is easy to see that the common-size gross profit percentage has decreased as a result of an increasing common-size trend in cost of goods sold. None of the other answers is a true statement. D. The gross profit percentage is not increasing.

Question 24 - ICMA 10.P2.004 - Basic Financial Statement Analysis A. The statement of stockholders' equity reports the changes in each stockholders' equity account and in total stockholders' equity during the year and reconciles the beginning balance in each account with the ending balance. B. This is a description of the equity section of the balance sheet. C. The statement of stockholders' equity includes other accounts besides the retained earnings account. D. This is not a statement of stockholders' equity.

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Question 25 - ICMA 10.P2.011 - Basic Financial Statement Analysis A. The Statement of Cash Flows contains three main classifications: operating activities, investing activities, and financing activities. This question is asking for what is not a classification on the Statement of Cash Flows. Equity activities is not a classification on the Statement of Cash Flows. B. The Statement of Cash Flows contains three main classifications. Cash flows from operating activities is one of those classifications. This question is asking for what is not a classification on the Statement of Cash Flows. C. The Statement of Cash Flows contains three main classifications. Cash flows from investing activities is one of those classifications. This question is asking for what is not a classification on the Statement of Cash Flows. D. The Statement of Cash Flows contains three main classifications. Cash flows from financing activities is one of those classifications. This question is asking for what is not a classification on the Statement of Cash Flows.

Question 26 - CMA 0695 P2 Q21 - Basic Financial Statement Analysis A. The issuance of common stock is classified as a financing activity. B. The payment of dividends is classified as a financing activity. C. The purchase of treasury stock is classified as a financing activity. D. Income tax refunds are classified as an operating activity.

Question 27 - CMA 1296 P2 Q23 - Basic Financial Statement Analysis A. The sale of a manufacturing plant is classified as an investing activity. B. The purchase of equipment is classified as an investing activity. C. Cash paid for interest is classified as an operating activity. D. The sale of bonds of other entities is classified as an investing activity.

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