Statement of cash flow

Question 1

Define Finance Activities

Answer 1

Results in changes in the size and composition of the equity capital and borrowings of the entity

Question 2

Indirect method

Answer 2

Most common - Net profit or loss is adjusted to changes in working capital and non-cash items included in the statement of P&L

Question 3

Direct method

Answer 3

Total gross cash receipts and payments, more useful than indirect, but more time consuming (not examinable)

Question 4

Define cash

Answer 4

Cash and demand deposits

Question 5

Define cash equivalents

Answer 5

Short term, highly liquid investments, readily convertible to cash

Question 6

Define operating activities

Answer 6

Principal revenue-producing activities

Question 7

Define investing activities

Answer 7

Acquisition and disposal of non-current assets and other investments not included in cash equivalents

Question 8

Indirect method proforma

Answer 8

Start with Profit before Tax

Then adjust in below order:
Operating activities (Inventories, trade payables, depreciation, interest etc.) 

Investing activities (PPE, Interest, dividends)

Financing activities (Proceeds from issuance of share cap, long term borrowings, lease liabilities, dividends paid)