Cash Flow Statement Financial Management Slide 12

Question 1

How to calculate profit in cash flow statement

Answer 1

Revenue earned in a period minus costs incurred in earning that revenue

Question 2

When do time lags occur cash flow statement

Answer 2

Payment for fixed assets, materials and services
Cash receipts for sales

Question 3

Profit compared with cash flow

Answer 3

P- sales - expenses (costs and expenses associated with the sales)
CF- cash inflows - cash outflows

Question 4

How are fixed assets accounted for in profit and loss account

Answer 4

By means of depreciation an expense known as depreciation is charged / deducted when calculating the profit

Question 5

In cash flow statement how are fixed assets dealt with

Answer 5

Only in the year of purchase / year of sale
If a fixed asset is purchased it is recorded as a cash outflow and the sale of a fixed asset is recorded as a cash inflow

Question 6

Why is depreciation never included in the cash flow statement

Answer 6

It is a non-cash transaction

Question 7

Why prepare a cash flow statement

Answer 7

•Show the main source of funds for the year
•To show the purposes for which these funds were used
•To judge if the sources of funding matched the relevant uses

Question 8

What is required to derive a cash flow statement from financial statements/accounts

Answer 8

•Profit and loss account for period
•balance sheet for the beginning and end of the accounting period

Question 9

What is the first heading in cash flow statement

Answer 9

Net cash flow from operating / trading activities
Movements in working capital

Question 10

What is included in net cash flow from operating / trading activities

Answer 10

Operating profit (Profit before interest and tax)
Depreciation
Other adjustments from profit and loss account

Question 11

What is included in movements in working capital

Answer 11

Increase/decrease in stocks (inventory)
Increase / decrease debtors (a/c receivable)
Increase / decrease in creditors (a/c payable)

Question 12

If there’s an increase in stocks (inventory) what does it mean for cash flow

Answer 12

It will be an outflow of funds

Question 13

If there’s a decrease in stocks (inventory) what does it mean for cash flow

Answer 13

There’s an inflow of funds

Question 14

If there’s an increase in creditors (a/c payable) what does it mean for cash flow

Answer 14

There’s an inflow of funds

Question 15

If there’s a decrease in creditors (a/c payable) what does it mean for cash flow

Answer 15

There’s an outflow of funds

Question 16

What is the second heading on a cash flow statement

Answer 16

Return on investment and servicing of finance

Question 17

Are dividends recorded as cash outflow or cash inflow

Answer 17

Outflow

Question 18

What is the third heading on a cash flow statement

Answer 18

Taxation period

Question 19

What is 4th heading on a cash flow statement

Answer 19

Investing activities

Question 20

Investment or purchases of fixed assets is this recorded as an outflow or inflow of cash

Answer 20

Outflow of cash

Question 21

Sales of fixed assets is this recorded as a cash inflow or outflow

Answer 21

Cash inflow

Question 22

How to calculate Investments in fixed assets

Answer 22

Fixed assets on the balance sheet at the end - fixed assets on the balance sheet at the beginning + depreciation from profit and loss

Question 23

What is the fifth heading on a cash flow statement

Answer 23

Financing activities

Question 24

How to calculate grants received

Answer 24

Grants on the balance sheet at the end - grants on the balance sheet at the beginning + amounted credited to income from profit and loss

Question 25

How to calculate repayment of debenture (loans)

Answer 25

Difference between debenture at the beginning and end of period on balance sheet

Question 26

Issue of shares or loans are these recorded as an inflow or outflow of cash

Answer 26

Inflow of cash

Question 27

What is the 6th heading on a cash flow statement

Answer 27

Movement in net liquid funds

Question 28

Example of net liquid funds

Answer 28

Bank overdraft
Cash