QUIZ

• 1-A company has a negative cash flow from operating activities. What could explain this negative cash flow?

•

A - High levels of dividend payments

b- A sudden increase in credit sales

c- A substantial investment in new fixed assets

d- The repayment of a loan

• 2-A business may incur an operating loss in a given financial year yet has more cash in the bank at the end. A reason for this could be that:

a- Dividends paid were higher this year than last

b- Debtors were allowed a longer period of credit

c- Some fixed assets were sold for cash

d- Payments to creditors were made more promptly

3- Which one of the following companies is most likely to run into cash flow problems?

A- A loss making company making components of vital strategic importance to the government?

B- A reasonably profitable, long established company with no expansion plans

C- A company which has recently sold part of its operations so as to concentrate on its core areas

D- A profitable new retailer about to embark on ambitious expansion plans

4-Which one of the following events will increase the cash balances of a business?

• A- Loan repayment to banks • B- Debtors paying amounts owed • C- Sale of stock on credit • D- Bank granting it an overdraft facility •

5- A statement of cash flows would be least useful in answering which of the following questions? • A) What was the average balance in the Cash account

during the period? • B) Did operating activities result in a positive or negative

net cash flow? • C) How much cash was provided or used by financing

activities during the period? • D) Were cash dividends paid by the company more or

less than the net cash flow from operations?

6- Which of the following transactions would increase the net cash flow from operating activities? • A) The collection of an account receivable from a

customer. • B) The issuance of capital stock for cash at a price

above par. • C) The purchase of a delivery truck by issuing a note

payable. • D) The sale of equipment for cash at a gain.

7-Which item may be of concern when analyzing cash flow from operating activities?

• • A- Repayment of debt. • B- Payments of dividends. • C- Decreasing accounts receivable. • D- Increasing inventories. •

• 8- If net cash provided or used by operating, financing and investing activities are added together, the result is:

A- Cash inflow.

B- Cash outflow.

C-The change in cash.

D-Net income.

• 9-What impact does depreciation have on the cash account?

• A- Depreciation results in an decrease to cash. • B- Depreciation results in an increase to cash. • C-Depreciation only impacts the cash account if inflation

has occurred. • D- Depreciation has no impact on the cash account.

• 10-Fund Flow is

A- Sources & Uses statement

B- Sources Statement

C- Uses Statement

D- none of the above.

• 11- Horizontal Analysis is

• A-Changes in financial statements • B- percentage analysis of increase & decrease in

corresponding items in comparative financial statements.• C- Financial statements which depict financial data.• D-none of the above.

• 12- Common size statements are• A- Financial Statements that depict financial data in the

form of verticle percentages.• B- Financial Statements that depict financial data in the

form of horizontal percentages • C- All financial statements• D- none of the above.

• 13- Banks generally prefer Debt Equity Ratio at :

• A- 1:1 B- 1:3 C-2:1 D- 3:1

• 14- If a company revalues its assets,its networth :• A- Will improve• B- Will remain same • C- Will be positively affected • D- None of the above.

• 15-Ratio analysis involves a comparison of the relationships between financial statement accounts so as to analyze the financial position and strength of a firm.

• a. True• b. False

• 16-The current ratio and inventory turnover ratio measure the liquidity of a firm. The current ratio measures the relationship of a firm's current assets to its current liabilities and the inventory turnover ratio measures how rapidly a firm turns its inventory back into a "quick" asset or cash.

• a. True• b. False

• 17-If a firm has high current and quick ratios, this is always a good indication that a firm is managing its liquidity position well.

• a. True• b. False

• 18-Depreciation is the decline in the value of• A- Fixed Assets• B- Current Assets• C- fictitious assets• D- None of the above

• 19-In straight line method, the depreciation is calculated on the basis of

• A- original cost price• B- market price• C- cost or market price• D- none of the above

• 20-Depreciation a/c is transferred to • A- trading a/c• B- Profit & Loss a/c• C- balance Sheet