Multiple Choice
Which section of the statement of cash flows would a manager's report outlining projected sales for a new store location most likely relate to?
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13. Statement of Cash Flows
Introduction to the Statement of Cash Flows
Multiple Choice
Cash flow to stockholders equals:
A
Dividends paid plus interest paid
B
Net income plus depreciation
C
Operating cash flow minus capital expenditures
D
Dividends paid minus net new equity raised
Verified step by step guidance1
Understand the concept of cash flow to stockholders: It represents the cash that a company returns to its equity investors, typically through dividends and other equity-related transactions.
Identify the components of the formula: Cash flow to stockholders is calculated as dividends paid minus net new equity raised.
Break down the formula: Dividends paid are the cash payments made to shareholders, while net new equity raised refers to the additional funds obtained by issuing new shares of stock.
Analyze the impact of net new equity raised: If a company raises new equity, it increases the total equity base, which reduces the cash flow to stockholders since the company retains more funds for operations or investments.
Apply the formula: To calculate cash flow to stockholders, subtract the net new equity raised from the dividends paid. Ensure you have accurate data for both components to perform the calculation.
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