C6 - Cashflows

Question 1

What is a cash flow?

Answer 1

A cash flow uses information from the accounting records to show an overall view of money flowing in and out of the company during an accounting period

Question 2

Cash flows are divided into what 3 sections?

Answer 2

Operating activities

Investing

Financing

Question 3

What does operating activities mean?

Answer 3

The main revenue producing activities for the business including tax and interest

Question 4

What does investing activities mean?

Answer 4

The acquisitions and disposals of non current assets and other investment with interest and dividends RECEIVED

Question 5

What does financing activities mean?

Answer 5

Receipts from issue of new shares, payment to repay share, changes in long term borrowing and PAYMENT of dividends.

Question 6

What’s the difference between cash and cash equivalents?

Answer 6

Cash - physical money and money in the bank.

Cash equivalents - short term high liquid investments that can be quickly and easily converted into cash.

Question 7

Are bank overdrafts payable on demand included in cash flows?

Answer 7

Yes

Question 8

Using a figure from the P or L, what do you start with on a cash flow?

Answer 8

Profit before tax but after finance costs.

Question 9

How does an increase in asset effect cash on cash flow?

Answer 9

Decrease on cash

Question 10

How does a decrease in liabilities effect cash on cash flows?

Answer 10

Decrease cash

Question 11

Add or subtract the following items on a cash flow..

Depreciation charges for the year

Answer 11

Add

Question 12

Add or subtract the following items on a cash flow..

Finance costs

Answer 12

Add

Question 13

Add or subtract the following items on a cash flow..

Increase in inventories

Answer 13

Subtract

Question 14

Add or subtract the following items on a cash flow..

Dividends received

Answer 14

Subtract

Question 15

Add or subtract the following items on a cash flow..

Loss on disposal of asset

Answer 15

Add

Question 16

Add or subtract the following items on a cash flow..

Profit on disposal

Answer 16

Subtract

Question 17

Add or subtract the following items on a cash flow..

Increase in trade receivables

Answer 17

Subtract

Question 18

Add or subtract the following items on a cash flow..

Increase in trade payables

Answer 18

Add

Question 19

Add or subtract the following items on a cash flow..

Interest paid in period

Answer 19

Subtract

Question 20

Add or subtract the following items on a cash flow..

Tax paid on income

Answer 20

Subtract

Question 21

What is the name of the final item on a cash flow

Answer 21

Net cash from operating activities

Question 22

How is a loss on disposal treated on the cash flow?

Answer 22

Taken off profit before tax

Added to operating activities

Added to proceeds on disposal

Question 23

Investing activities on cash flow

How to calculate proceeds on disposal?

Answer 23

Carrying amount add profit / deduct loss

Question 24

Investing activities on cash flow

How to calculate purchase of PPE

Answer 24

Opening balance - carrying amount - depn charge - closing balance at year end + increase revaluation

Question 25

How to calculate net cash at beginning and end of year on cash flow?

Answer 25

Cash balance - any overdraft balance

Question 26

What 7 items are shown as operating activities on a cash flow? Include add or subtractions.

Answer 26

Add depreciation

Add finance costs

Add loss / subtract profit

Add decrease in inventories / subtract increase in inventories

Add decrease in TR / subtract increase in TR

Add increase in TP / subtract decrease in TP

Subtract dividends received

Question 27

What 3 items are shown in investing activities on a cash flow? Include add and subtraction

Answer 27

Add proceeds

Subtract purchase of PPE

Add dividends received.

Question 28

What 3 items are found on financing activities? Include add and subtractions

Answer 28

Add increase in bank loan / subtract decrease

Add increase share capital

Subtract dividends PAID