Unit 6: Cash Flow Statement - Practice Quiz

1 What does a Cash Flow Statement primarily show?

2 A Cash Flow Statement is prepared to explain changes in which item between two balance sheet dates?

3 Under which standard classification are cash flows in a Cash Flow Statement grouped?

4 Which of the following is a cash flow from operating activities?

5 Purchase of a building for cash is classified under which activity?

6 Issue of debentures for cash is shown under which activity?

7 Which two methods can be used to compute cash flow from operating activities?

8 Under the indirect method, the starting point for calculating operating cash flow is:

9 In the indirect method, depreciation is treated as:

10 Which of the following is an example of cash equivalents?

11 Payment of dividend by a company is classified as a cash flow from:

12 Sale of an old machine for cash is recorded as a cash flow under:

13 An increase in trade receivables during the year is treated in operating cash flow as a:

14 A decrease in inventory during the year is treated in operating cash flow as a:

15 Interest paid on borrowings by a non-financial company is generally shown under:

16 A consistently positive cash flow from operating activities generally indicates that a business is:

17 A large cash outflow under investing activities most commonly suggests that a firm is:

18 The Cash Flow Statement is mainly useful for assessing an enterprise's:

19 If net cash flow from financing activities is negative, it may indicate that the company has:

20 The net increase or decrease in cash and cash equivalents is found by:

21 A company reports high net profit but a negative cash flow from operating activities. Which of the following best explains the significance of this situation for an analyst?

22 Which statement best distinguishes a Cash Flow Statement from an Income Statement?

23 Under the indirect method, while computing cash flow from operating activities, an increase in trade payables should be:

24 A machine costing with accumulated depreciation of was sold for . How is this transaction treated in the Cash Flow Statement?

25 Which of the following is classified as a financing activity for a non-financial company?

26 Net profit before tax is . Depreciation is , and there is a profit on sale of investments of . What is the operating profit before working capital changes?

27 For a finance company whose main business is lending, interest received and interest paid are classified under:

28 Which of the following would result in a cash outflow from investing activities?

29 Opening balance of provision for tax is , closing balance is , and tax paid during the year was . What amount of tax provision is charged to the profit and loss account?

30 Under the indirect method, which of the following adjustments is made for a decrease in inventory?

31 A company issued debentures of at par during the year and paid debenture interest of . How are these treated?

32 Which of the following transactions does NOT affect the cash flow statement?

33 Cash flow from operating activities is , cash used in investing activities is , and cash from financing activities is . If opening cash and cash equivalents were , the closing balance is:

34 While preparing a cash flow statement, proposed dividend of the previous year that is approved and paid in the current year is treated as:

35 A firm consistently shows positive cash flow from operations, negative cash flow from investing, and negative cash flow from financing. This pattern most likely indicates:

36 Which of the following limitations of the cash flow statement is valid?

37 A company's operating cash flow is and its current liabilities are . The operating cash flow ratio is:

38 If a company's investing activities show a large cash inflow mainly from the sale of fixed assets while operating cash flow is declining, an analyst should interpret this as:

39 Free cash flow is best described as:

40 Two companies report identical net profits, but Company A has much higher cash flow from operations than Company B. This most likely suggests that:

41 A company reports Net Profit before tax of . During the year, machinery costing (accumulated depreciation ) was sold for . Depreciation charged for the year was . What is the cash flow from operating activities adjustment for these non-operating items (before working capital changes)?

42 A firm shows positive net cash flow overall, but cash from operating activities is negative while cash from financing activities is highly positive due to fresh borrowings. What does this pattern most likely indicate?

43 Provision for tax at the beginning was and at the end . Tax paid during the year was . What amount of tax provision was charged to the Statement of Profit and Loss during the year?

44 As per AS 3, how should a financing institution (whose principal business is lending) treat interest received and interest paid in its cash flow statement?

45 A company issued shares of to acquire a building of the same value, and separately paid cash for equipment. How are these transactions reflected in the cash flow statement?

46 A company's net profit rose 20% but its operating cash flow declined sharply. Which combination of changes best explains this divergence?

47 Opening balance of machinery (net) was and closing was . Depreciation for the year was and machinery with book value was sold. What was the amount of machinery purchased during the year?

48 A company declared and paid a final dividend of for the previous year and proposed a dividend of for the current year. How is this treated in the current year's cash flow statement (as per Indian practice treating proposed dividend of prior year)?

49 Which statement best captures why a profitable company may still face bankruptcy, a key insight the cash flow statement reveals?

50 Under the direct method, cash paid to suppliers is calculated. Cost of goods sold is , inventory increased by , and creditors decreased by . What is the cash paid to suppliers?

51 A company's 10% Debentures were at the start. During the year debentures were redeemed at a premium of 5% and interest was duly paid. What are the total financing outflows relating to debentures?

52 Two firms have identical net profits. Firm X shows most cash generated from operations; Firm Y shows most cash from sale of fixed assets and fresh loans. What does this reveal about earnings quality?

53 Net profit before tax is . Adjustments: depreciation , goodwill amortised , interest on investments received , and loss on sale of investment . What is operating profit before working capital changes?

54 Which of the following correctly represents the treatment of a bank overdraft repayable on demand and a short-term marketable investment (maturity 2 months) as per AS 3?

55 Equity share capital rose from to and Securities Premium from to . Bonus shares of were issued during the year. What is the cash inflow from issue of shares?

56 A company consistently reports operating cash flow lower than net profit each year, with the gap widening. Ignoring depreciation, which explanation is most consistent with this trend?

57 A firm's surplus (P&L) balance moved from to . During the year, dividend of was paid and was transferred to General Reserve. What is the net profit before these appropriations (net profit after tax)?

58 Given: cash from operations , tax paid , interest paid on loan (non-financial enterprise). What is the net cash from operating activities?

59 Which limitation of the cash flow statement is most accurate when it is used in isolation for decision-making?

60 A mature company shows: negative operating? No — positive operating cash flow, negative investing cash flow, and negative financing cash flow. What does this pattern typically indicate?