Deck 10: Cash Flow Statements

Question 1

Nice'n'easy which is a trading business operating on a cash only basis has an operating profit of £30000 after charging depreciation of £4000 and has an increase in inventory of £5000. What is its cash flow from operations?

A) £21000
B) £39000
C) £31000
D) £29000

Answer 1

D

Question 2

Getting-Harder has an operating profit of £40000 after charging depreciation of £5000 and has a decrease in inventory of £7000 and an increase in receivables of £3 500. What is its cash flow from operations?

A) £51000
B) £48500
C) £40500
D) £33500
E) £36500

Answer 2

B

Question 3

All the information that is in the cash flow statement can be derived from the other financial statements and the notes to the accounts.

Answer 3

True

Question 4

Cash flow statements are seen as more important than income statements by bankers.

Question 5

What effect have the transactions set out above in respect of loans had on Expansion's financial risk?

A) Increased the gearing and financial risk
B) Decreased the gearing and financial risk
C) Had a neutral effect

Question 6

Borrowit had a cash flow from operations of £56000 and during the year bought fixed assets for £84000, introduced £42000 new equity capital, took out a new loan and had a net cash flow of £36000. What was the amount of the new loan ?

A) £8000
B) £36000
C) £50000
D) £92000

Question 7

The sale of fixed assets has no impact on the cash flow statement.

Question 8

A business can be profitable but have negative cash flows.

Question 9

Cash flow statements provide useful information about the nature of cash flows.

Question 10

An increase in payables will mean that the cash flow from operations is lower than the profit figure.

Question 11

A decrease in receivables will mean that the cash flow from operations is higher than the profit figure.

Question 12

Cash flows are just another name for revenue and expenses.

Question 13

Flogemoff had a cash flow from operations of £48000 and during the year bought fixed assets for £42000, introduced £21000 in new equity capital, sold assets with a carrying value of £36000 resulting in a paper loss of £6000. What was the net cash flow ?

A) £27000
B) £57000
C) £63000
D) £69000

Question 14

Depreciation has the same effect on cash flows as it does on the income statement.

Question 15

Inventory increases are added to profit to arrive at the operating cash flow.