Cash Flow Statement Test

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Cash Flow Statement Test - 12

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Question 1
1 / -0

New profit earned $$+$$ non working capital expense =

A
Sinking fund

B
Use of funds

C
Funds provided by operation

D
Cash provided by operation

Solution

Funds from operations refers to the figure used by real estate investment trusts to define the cash flow from operations.
It is calculated as new profit earned plus non working capital expense.
Question 2
1 / -0

Which of the following items would be specifically included in the statement of cash flows constructed in compliance with $$AS-3$$?

A
Conversion of debt to equity

B
Acquiring an asset through lease

C
Operating and non-operating cash flow information

D
Purchasing a building by given a mortgage to the seller

Solution

Operating and non-operating cash flow are inflows and outflows of cash that are related or not related to the day-to-day, ongoing operations of a business. These non operating cash flows are associated with cash flows from investing and cash flows from financing on a company's statement of cash flows.
Question 3
1 / -0

A) Funds flow statement and cash flow statement are one and the same.
B) A cash flow statement can very well be equated with an 'Income statement'.
Of these statements :-

A
Both (A) and (B) are true

B
Both (A) and (B) are false

C
(A) is true but (B) is false

D
(A) is false but (B) is true

Solution

(A) A cash flow statement is different from a cash budget. A cash flow statement shows the cash inflows and outflows which have already taken place during a past time period.
Funds Flow Statement states the changes in the working capital of the business in relation to the operations in one time period.
(B) A cash flow statement shows the exact amount of a company's cash inflows and outflows over a one-month period.
The income statement is the most common financial statement, and shows a company's revenue and total expenses, including non-cash accounting such as depreciation, over a one-month period.
Both are different.
Question 4
1 / -0

Which of the following are true or false?
a) Purchase of fixed assets is a use of funds.
b) For funds flow statement, provision for taxation will be treated as an item of internal source.

A
both (a) and (b) are true

B
both (a) and (b) are false

C
(a) is true but (b) is false

D
(a) is false but (b) is true

Solution

Use of funds refers to investing funds in purchase of assets which gives return after some period of time. Hence, purchase of fixed assets is a use of funds.

Provision for taxation is treated as an item of internal source because it is made internally.
Question 5
1 / -0

In net profit is Rs. $$25,000$$/- after writing off preliminary expenses of Rs. $$5000$$/- then the funds from operation will be.

A
Rs. $$25,000$$/-

B
Rs. $$30,000$$/-

C
Rs. $$20,000$$/-

D
Rs. $$10,000$$/-
Question 6
1 / -0

Cash flow statement reveals _______.

A
The effects of transactions involving movement of cash

B
A statement depicting change in cash position from one period to another

C
Flow of funds

D
Both (A) & (B)

Solution

Cash flow statement is a statement showing the inflow and outflow of the cash of a company classified in 3 categories:
1. Operating cash flows
2.Investing cash flows
3.Financing cash flows

It involves movement of the cash in the company from these 3 categories of activities.
Therefore, It is a statement depicting changes in cash position from one period to another.
Question 7
1 / -0

The term 'funds' as used in 'funds flow statement' means.

A
Cash

B
Current Assets

C
Current Liabilities

D
Current Assets minus Current Liabilities
Question 8
1 / -0

A cash flow statement is useful for __________.

A
Short-term planning

B
Long-term planning

C
Medium term planning

D
None of the above

Solution

A cash flow statement is a statement which shows changes in the cash position of an organisation between two periods. As it consists of two periods it basically consists of short period. Because if prepared for long period the estimation of cash values from various activities will not give accurate outcomes leading to less effective planning and decision making. Hence, it is useful for short-term planning.

Question 9

1 / -0

Match the items of the following two lists and suggest the correct code:

List-I	List-II
(a) Pay-back Rate of Return	(i) Discounted Cash Flow Technique
(b) Internal Rate of Return	(ii) Compounded values of investments and returns
(c) Benefit Cost Ratio	(iii) Crude method for project evaluation
(d) Net Terminal Value Method	(iv) Varying sized projects evaluation

$$(a)-(ii), (b)-(iii), (c)-(i), (d)-(iv)$$

$$(a)-(iii), (b)-(i), (c)-(iv), (d)-(ii)$$

$$(a)-(i), (b)-(iv), (c)-(ii), (d)-(iii)$$

$$(a)-(iv), (b)-(ii), (c)-(iii), (d)-(i)$$

Solution

The payback reciprocal is a crude estimate of the rate of return for a project or investment.
The internal rate of return (IRR) is a discounting cash flow technique which gives a rate of return earned by a project.
A benefit-cost ratio (BCR) is a ratio used in a cost-benefit analysis to summarize the overall relationship between the relative costs and benefits of a proposed project.
The terminal value method is an improvement over the net present value method of making capital investment decisions.

Question 10
1 / -0

Stock in the beginning results in __________.

A
A source of funds

B
An application of funds

C
No flow of funds

D
Change in current assets

Solution

Application of funds is a fund statement which shows sources and uses of the working capital and other liquid funds Hence, stock in the beginning results in an application of funds.

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Cash Flow Statement Test - 12

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Cash Flow Statement Test - 12

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Question 1

Sinking fund

Use of funds

Funds provided by operation

Cash provided by operation

Solution

Question 2

Conversion of debt to equity

Acquiring an asset through lease

Operating and non-operating cash flow information

Purchasing a building by given a mortgage to the seller

Solution

Question 3

Both (A) and (B) are true

Both (A) and (B) are false

(A) is true but (B) is false

(A) is false but (B) is true

Solution

Question 4

both (a) and (b) are true

both (a) and (b) are false

(a) is true but (b) is false

(a) is false but (b) is true

Solution

Question 5

Rs. $$25,000$$/-

Rs. $$30,000$$/-

Rs. $$20,000$$/-

Rs. $$10,000$$/-

Question 6

The effects of transactions involving movement of cash

A statement depicting change in cash position from one period to another

Flow of funds

Both (A) & (B)

Solution

Question 7

Cash

Current Assets

Current Liabilities

Current Assets minus Current Liabilities

Question 8

Short-term planning

Long-term planning

Medium term planning

None of the above

Solution

Question 9

$$(a)-(ii), (b)-(iii), (c)-(i), (d)-(iv)$$

$$(a)-(iii), (b)-(i), (c)-(iv), (d)-(ii)$$

$$(a)-(i), (b)-(iv), (c)-(ii), (d)-(iii)$$

$$(a)-(iv), (b)-(ii), (c)-(iii), (d)-(i)$$

Solution

Question 10

A source of funds

An application of funds

No flow of funds

Change in current assets

Solution

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