Budgeting And Cash Flow Estimation(Financial Management And Financial Markets ) Questions and Answers

Question 1. Which of the following would be considered a cash-flow item from a "financing" activity?
  1.    A cash outflow to the government for taxes
  2.    A cash outflow for payment of interest
  3.    A cash outflow for purchase of fixed asset
  4.    A cash outflow to purchase bonds issued by another company
Explanation:-
Answer: Option B. -> A cash outflow for payment of interest
:
B
A cash outflow for payment of interestwould be considered a cash-flow item from a "financing" activity
Question 2. Cash flow statement shows the activities:
  1.    Operating
  2.    Financial
  3.    Balance Sheet
  4.    All three- Operating, Financial, Balance sheet
Explanation:-
Answer: Option D. -> All three- Operating, Financial, Balance sheet
:
D
Cash flow statement shows the activities of -operating, financial, balance sheet items.
Question 3. Under indirect method of preparing statement of cash flows, depreciation expense affects:
  1.    Operating activities
  2.    Investing activities
  3.    Financing activities
  4.    None of these
Explanation:-
Answer: Option A. -> Operating activities
:
A
Under indirect method of preparing statement of cash flows, depreciation expense affects operating activities.
Question 4. The statement which show the cash situation is called:
  1.    Cash flow statement
  2.    Income statement
  3.    Balance sheet
  4.    None of these
Explanation:-
Answer: Option A. -> Cash flow statement
:
A
The statement which show the cash situation is called cash flow statement.
Question 5. The main key activity of cash flow activities is:
  1.    Operating activities
  2.    Financing Activities
  3.    Investing Activities
  4.    None of these
Explanation:-
Answer: Option A. -> Operating activities
:
A
The main key activity of cash flow activities is operating activities.
Question 6. Which of the following would not be considered a cash flow from “operating” activities?
  1.    Payments for the inventory
  2.    Interest received on loans
  3.    Tax payments
  4.    Payment of debt principle
Explanation:-
Answer: Option D. -> Payment of debt principle
:
D
Payment of debt principlewould not be considered a cash flow from “operating” activities
Question 7. In the case of financial enterprises, the cash flow resulting from interest received should be classified as cash flow from ..............
  1.    Operating activities
  2.    Investing activities
  3.    Financing activities
  4.    None of these
Explanation:-
Answer: Option A. -> Operating activities
:
A
In the case of financial enterprises, the cash flow resulting from interestreceived should be classified as cash flow from operating activities.
Question 8. Which of the following statements are true?
  1.    Cash flow reveals only the inflow of cash
  2.    Cash flow reveals only the outflow of cash
  3.    Cash flow is a substitute for income statement
  4.    None of these
Explanation:-
Answer: Option D. -> None of these
:
D
None of these statements are true.
Question 9. Sale of fixed assets is ___ while calculating cash flow from investing activities.
  1.    Not treated
  2.    Added
  3.    Subtracted
  4.    None of these
Explanation:-
Answer: Option B. -> Added
:
B
Sale of fixed assets is added while calculating cash flow from investing activities.
Question 10. When a fixed asset is bought as hire purchase, interest element is classified under ___.
  1.    Operating activities
  2.    Investing activities
  3.    Financing activities
  4.    None of these
Explanation:-
Answer: Option C. -> Financing activities
:
C
When a fixed asset is bought as hire purchase, interest element is classified under financing activities.
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