Statement Of Cash Flow

Question 1

What three areas must cash flow be analysed between?

Answer 1

operation
investing
financing

Question 2

what are operating activities?

Answer 2

the main revenue producing activities of the entity that are not investing or financing activities, so operating cash flows include cash received from customers and cash paid to suppliers and employees

Question 3

what are investing activities?

Answer 3

acquisition and disposal of long-term assets and other investments that are not considered to be cash equivalents

Question 4

what are financing activities?

Answer 4

activities that alter the equity/ capital and borrowing structure of equity

Question 5

what is part one of the Reconciliation of operating profit, to Net cash flow from operating activity?

Answer 5

operating profit (profit before deduction of tax and interest maybe dividend)

Question 6

Does the reconciliation of operating profit go on the cash flow statement?

Answer 6

Yes it is the operating activities section

Question 7

what is part 2 of the Reconciliation of operating profit, to Net cash flow from operating activity?

Answer 7

ADD back depreciation (not real cash expense)

Question 8

what is part 3 of the Reconciliation of operating profit, to Net cash flow from operating activity?

Answer 8

ADD loss on disposal/ Minus profit
as actual proceeds will be shown in investing section

Question 9

what is part 4 of the Reconciliation of operating profit, to Net cash flow from operating activity? (inventory)

Answer 9

ADD decrease in inventory/ Minus increase in inventory
Decreased stock improves cash flow as less cash tied up so more cash available

Question 10

what is part 5 of the Reconciliation of operating profit, to Net cash flow from operating activity? (trade receivables)

Answer 10

ADD decrease in trade and other receivables
MINUS increase in trade and other receivables
decrease shows debts collected quicker so improved cash flow

Question 11

what are other receivables/ payables?

Answer 11

accruals and repayments

Question 12

what is part 6 of the Reconciliation of operating profit, to Net cash flow from operating activity? (trade payables)

Answer 12

ADD increase in trade payables
MINUS decrease in trade payables
Increase suggests business is delaying payment to suppliers improving short time cash flow

Question 13

what is part 7 of the Reconciliation of operating profit, to Net cash flow from operating activity?

Answer 13

Equals cash (used in)/from operations

Question 14

what is part 8 of the Reconciliation of operating profit, to Net cash flow from operating activity?

Answer 14

DEDUCT finance costs/ interest paid in the year
Loans and overdraft actually paid (might need working out)

Question 15

what is part 9 of the Reconciliation of operating profit, to Net cash flow from operating activity?

Answer 15

DEDUCT taxation paid
Tax actually paid on income for the year (might need working out)

Question 16

What goes on the cash flows from investing activities section?

Answer 16

Purchase of NCA (MINUS)
Proceeds from sale of NCA (ADD)
Interest received (ADD)
Dividends received (ADD)
Net cash(used in)/ from investing activities

Question 17

What goes on the cash flows from financial activities section?

Answer 17

Proceeds from issue of share capital (ADD)
Repayment of share capital (MINUS)
Proceeds from long term borrowing (ADD)
Repayment of long term borrowing (MINUS)
Dividends paid (MINUS- amount paid in year)
Net cash (used in)/ from financing activities

Question 18

How will revaluation of non-current assets be treated in a cash flow statement?

Answer 18

Book entry so no cash movement it will not be entered

Question 19

What will the treatment of a bonus issue of shares be on the cash flow statement?

Answer 19

Don’t cause any movement of cash so wont be shown in cash flow

Question 20

what concept is used in the cash flow statement?

Answer 20

Money measurement (only money transactions

Question 21

What must you consider when looking at positive cash flow from operating activities section?

Answer 21

sub total cash (used in)/from operations (cash from revenue)

Question 22

What can you make a comparison between on the cash flow statement?

Answer 22

profit and cash generated from operations and talk about major differences

Question 23

What can the net cash (used in)/from operations tell you?

Answer 23

if its a positive figure it shows that the company had been bale to meet its interest and tax obligations

Question 24

What does the investing section of the cash flow statement show?(generally)

Answer 24

amount of investment during the year
should be a link between cost of investment and increase in loan/share capital