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Question 01

Cash has been described as:

a) the lifebuoy of the business.

b) the lifeboat of the business.

c) he lifeline of the business.

d) the lifeblood of the business.

Question 02

The definition of cash as used in Cash Flow Statements includes:

a) only cash balances.

b) only bank balances.

c) bank balances and bank overdrafts.

d) cash in hand plus bank balances less bank overdrafts.

Question 03

How can a profitable business fail?

a) Because it can't pay its bills

b) Because it has more current liabilities than current assets

c) Because it has a bank overdraft

d) Because it has too much cash

Question 04

Which of the following is not a standard heading in a cash flow statement?

a) Financing

b) Taxation

c) Equity dividends paid

d) Current expenditure

Question 05

The heading in a Cash Flow Statement 'Changes in Financing' means:

a) the cash outflow due to loan interest payments being made.

b) the cash flow from share and loan issues and repayments.

c) cash dividends paid to shareholders.

d) the change in the level of bank balances in the period.

Question 06

'Equity dividends' shown in the cash flow statement will comprise:

a) all company dividends paid during the year.

b) all dividends paid to voting shares in the year.

c) all dividends paid and proposed in the year relating to voting shares.

d) all proposed dividends in the year relating to voting shares.

Question 07

Depreciation is added back to profit when arriving at the cash flow from operating activities because:

a) depreciation is only an estimated amount.

b) depreciation does not affect profit.

c) depreciation does not result in a flow of cash.

d) depreciation only affects the balance sheet, not the profit and loss account.

Question 08

If net profit before taxation and interest was £95,000, depreciation for the year was £17,000, stock has decreased during the year by £7,000, debtors have increased by £11,000 and creditors have decreased by £4,000, what is the overall cash flow from operating activities?

a) £104,000

b) £112,000

c) £98,000

d) £134,000

Question 09

Payments under leasing contracts would be shown:

a) in total within 'Returns on investments and servicing of finance'.

b) in total within 'Capital expenditure'.

c) the capital element is shown within 'Acquisitions and disposals' and the interest element is shown within 'Returns on investments and servicing of finance'.

d) the capital element is shown within 'and the interest element is shown within 'Returns on investments and servicing of finance'.

Question 10

If a company has paid dividends on its preference shares, under which one of the cash flow statement headings would they appear?

a) Returns on investments and servicing of finance

b) Financing