Question 1

The receipt of dividends would be classified as a cash inflow from ______________ activities.

Accepted Answer

The answer of The receipt of dividends would be classified...

Question 2

Which of the following is not an early warning indicator of cash flow problems?
A) Operating activities are paid for using proceeds raised from the issue of shares.
B) Cash received from customers is greater than cash paid to suppliers.
C) Operating cash outflows.
D) The entity continues to borrow more money than it repays.

Accepted Answer

Cash received from customers being greater than cash paid to suppliers is actually a positive indicator of cash flow, suggesting that the company is generating more cash from its operations than it is spending. This is a sign of healthy cash flow, not an early warning indicator of cash flow problems.

Question 3

A net total cash outflow in investing activities is considered ____________(normal or abnormal)for a healthy growing business.

Accepted Answer

The answer of A net total cash outflow in investing...

Question 4

Which of the following statements concerning the cash adequacy ratio is true?
A) It measures the entity's ability to reinvest in its operations and to make distributions to owners from its operating cash flow.
B) It expresses the cash flow from operating activities as a percentage of capital expenditure plus dividends.
C) A ratio result greater than one suggests a good performance.
D) All of the statements are true.

Accepted Answer

All the statements accurately describe aspects of the cash adequacy ratio, which assesses a company's ability to manage its operating cash flow for reinvestment, distributions, and its sufficiency in covering capital expenditures and dividends.

Question 5

__________ expense relating to property,plant and equipment is a common business expense that is not included in the statement of cash flows.

Accepted Answer

The answer of __________ expense relating to property,plant and equipment...

Question 6

Cash flows from investing activities arise from changes in non- ___________ ____________ on the balance sheet.

Accepted Answer

The answer of Cash flows from investing activities arise from...

Question 7

The time taken from the purchase of inventory from suppliers to receiving the cash from the sale of that inventory to customers is called the operating ______ ________.

Accepted Answer

The answer of The time taken from the purchase of...

Question 8

If dividends declared at the end of the period are $10 000,and the balance of dividends payable increased by $2000 over the period,the amount of dividends paid during the year is equal to _________.

Accepted Answer

The answer of If dividends declared at the end of...

Question 9

Which of the following statements concerning the cash flow ratio is true?
A) The cash flow ratio is a better measure of liquidity than the current ratio because it is calculated using cash flow generated over a whole reporting period rather than the current assets at a point in time.
B) The cash flow ratio is used to assess liquidity.
C) The cash flow ratio compares the cash flow from operating activities with the current liabilities.
D) All of the above statements are true.

Accepted Answer

All the statements provided about the cash flow ratio are true. It is indeed considered a better measure of liquidity than the current ratio because it assesses cash flow over a period rather than just current assets at a specific point in time. It is used to assess liquidity by comparing the cash flow from operating activities to current liabilities, providing a more dynamic view of a company's ability to cover its short-term obligations.

Question 10

Cash from operating activities less the amount spent on capital expenditure is the formula for:
A) the cash flow to sales ratio.
B) the cash adequacy ratio.
C) free cash flow.
D) the debt coverage ratio.

Accepted Answer

The formula given is for free cash flow, which represents the cash generated by a company's operations that is available for distribution to investors, creditors, or for further investment.

Question 11

A healthy business would normally expect to have a net cash __________ (inflow or outflow)from operating activities.

Accepted Answer

The answer of A healthy business would normally expect to...

Question 12

During the financial period the amount owing from debtors increased by $40 000.If the credit sales for the period are $500 000 the cash inflows from debtors on the statement of cash flows will be __________.

Accepted Answer

The answer of During the financial period the amount owing...

Question 13

The opening balance of inventory is $50 000 and the closing balance is $15 000.If cost of sales is $500 000 for the period,assuming creditors' balances have not altered,the amount of cash paid to suppliers is _____________.

Accepted Answer

The answer of The opening balance of inventory is $50...

Question 14

Which of the following would assist an entity wanting to improve their cash flow?
A) Selling surplus inventory.
B) Investing surplus cash.
C) Utilising the available credit terms when paying suppliers.
D) All of the above options would assist in improving cash flow.

Accepted Answer

Selling surplus inventory can generate immediate cash flow, investing surplus cash can earn interest or returns, and utilising available credit terms when paying suppliers can delay cash outflow, all of which can improve an entity's cash flow.

Question 15

Free cash flow is:
A) the cash available to loan to other entities.
B) the cash available to pay current liabilities.
C) the cash available to repay debt, pay dividends and expand operations.
D) the cash available to purchase supplies.

Accepted Answer

Free cash flow refers to the cash that is generated by a business after it has covered all of its expenditure on capital expenditures and operating costs. This cash is a critical component in determining a company's ability to expand its operations, repay debt, and pay dividends to its shareholders. Therefore, option C is the best choice as it accurately describes the meaning of free cash flow. Option A is incorrect because free cash flow cannot be loaned to other entities as it is a result of the company's internal operations. Option B is incorrect as free cash flow is not necessarily related to paying current liabilities. Option D is incorrect as free cash flow is not related to the purchase of supplies.

Question 16

Borrowing money and raising share capital are included as ________________ activities on a statement of cash flows.

Accepted Answer

The answer of Borrowing money and raising share capital are...

Question 17

Which of the following cash flow ratios is used to determine an entity's solvency?
A) Debt coverage ratio.
B) Free cash flow ratio.
C) Cash adequacy ratio.
D) Cash flow ratio.

Accepted Answer

The debt coverage ratio is used to determine the entity's ability to cover its obligations by analyzing its ability to generate enough cash flow to cover its debt payments. This ratio focuses on the long-term solvency of the entity.

Question 18

The formula for the cash adequacy ratio is :
A) cash from operating activities divided by (capital expenditure plus dividends paid).
B) non-current liabilities divided by cash from operative activities.
C) cash from operating activities divided by non-current liabilities.
D) cash from financing activities divided by net assets.

Accepted Answer

The cash adequacy ratio is calculated by dividing cash from operating activities by the sum of capital expenditure and dividends paid. This ratio measures a company's ability to cover its long-term financial obligations and investments using cash generated from its core business operations.

Question 19

Cash __________________ are highly liquid investments and short-term borrowings that are subject to an insignificant risk of change in value.

Accepted Answer

The answer of Cash __________________ are highly liquid investments and...

Question 20

The statement of cash flows assists decision makers in assessing an entity's ability to _______________cash flows.

Accepted Answer

The answer of The statement of cash flows assists decision...

Quiz 7: Statement of Cash Flows

The receipt of dividends would be classified as a cash inflow from ______________ activities.

Which of the following is not an early warning indicator of cash flow problems?

A net total cash outflow in investing activities is considered ____________(normal or abnormal)for a healthy growing business.

Which of the following statements concerning the cash adequacy ratio is true?

__________ expense relating to property,plant and equipment is a common business expense that is not included in the statement of cash flows.

Cash flows from investing activities arise from changes in non- _ __ on the balance sheet.

The time taken from the purchase of inventory from suppliers to receiving the cash from the sale of that inventory to customers is called the operating __.

If dividends declared at the end of the period are $10 000,and the balance of dividends payable increased by $2000 over the period,the amount of dividends paid during the year is equal to _________.

Which of the following statements concerning the cash flow ratio is true?

Cash from operating activities less the amount spent on capital expenditure is the formula for:

A healthy business would normally expect to have a net cash __________ (inflow or outflow)from operating activities.

During the financial period the amount owing from debtors increased by $40 000.If the credit sales for the period are $500 000 the cash inflows from debtors on the statement of cash flows will be __________.

The opening balance of inventory is $50 000 and the closing balance is $15 000.If cost of sales is $500 000 for the period,assuming creditors' balances have not altered,the amount of cash paid to suppliers is _____________.

Which of the following would assist an entity wanting to improve their cash flow?

Free cash flow is:

Borrowing money and raising share capital are included as ________________ activities on a statement of cash flows.

Which of the following cash flow ratios is used to determine an entity's solvency?

The formula for the cash adequacy ratio is :

Cash __________________ are highly liquid investments and short-term borrowings that are subject to an insignificant risk of change in value.

The statement of cash flows assists decision makers in assessing an entity's ability to _______________cash flows.