Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

Financial Accounting

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

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Multiple Choice

Which of the following occurs when a company goes public?

The company must switch from accrual to cash basis accounting.

The company issues shares to the public for the first time through an initial public offering (IPO).

The company is no longer required to prepare a statement of cash flows.

The company is required to immediately pay off all outstanding debts.

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Verified step by step guidance

Understand the concept of 'going public': When a company goes public, it means the company is offering its shares to the public for the first time through an Initial Public Offering (IPO). This allows the company to raise capital from public investors.

Clarify the accounting basis: A company going public does not need to switch from accrual to cash basis accounting. Public companies are required to follow Generally Accepted Accounting Principles (GAAP), which typically use accrual basis accounting.

Examine the statement of cash flows requirement: Public companies are required to prepare and disclose a statement of cash flows as part of their financial reporting. This is a mandatory requirement under GAAP and SEC regulations.

Address the debt repayment misconception: Going public does not require a company to immediately pay off all outstanding debts. The funds raised through an IPO can be used for various purposes, including debt repayment, but it is not a mandatory condition.

Conclude with the correct answer: The correct answer is that the company issues shares to the public for the first time through an Initial Public Offering (IPO). This is the defining characteristic of a company going public.