Wgu C214 Financial Management Overview Calculation Quiz With Solutions 2023/24

Cashflows {Ans: The sum of CFO + CFI + CFF is equal to the change in cash during the period. catagorization of cash flow is flexible and is impacted by the firm's operating environment in several ways: 1. Core activities - will impact the way cash flows are catagorized. For instance, two firms can purchase similar lathes and catagorize the cash outflow differently. For a machine shop, the lathe is likely a long-term asset and the cash flow will be part of CFI; for a equipment vendor, the lathe is likely inventory and included in CFO. 2. Cash flow management - some managers will "manage" (i.e., increase or decrease) reporting of cash flows. For instance, a manager whose bonus is impacted by CFO may be tempted to recatagorize some items to make CFO appear larger. *While most of the techniques to recatagorize cash flows are beyond the scope of this course, it is relatively easy to do for a year or two without violating the rules of GAAP accounting. 3. Market pressure - even if a manager's personal income is not impacted, there are other pressures to manipulate cash flow categorization in the market place. For instance, a firm