Free Cash Flow Statement 02 Practice Test - 12th Grade - Commerce 

Question 1

A company sells old plant for Rs. 12,000 cash. The book value of the plant is Rs. 7,000. This transaction would affect:

A.

Investing activities

B.

Financing activities

C.

Both investing and financing activities

D.

None of these

SOLUTION

Solution : A

This transaction would affect investing activities since it is related to fixed assets

Question 2

Sale of fixed assets is ___ while calculating cash flow from investing activities.

A.

Not treated

B.

Added

C.

Subtracted

D.

None of these

SOLUTION

Solution : B

Sale of fixed assets is added while calculating cash flow from investing activities.

Question 3

Which of the following statements are true?

A.

Cash flow reveals only the inflow of cash

B.

Cash flow reveals only the outflow of cash

C.

Cash flow is a substitute for income statement

D.

None of these

SOLUTION

Solution : D

None of these statements are true.

Question 4

Non-cash expenses like depreciation, depletion & amortization expense are _______ to net profit before tax under indirect method.

A.

Not treated

B.

Added

C.

Subtracted

D.

None of these

SOLUTION

Solution : B

Non-cash expenses like depreciation, depletion & amortization expense are added to net profit before tax under indirect method.

Question 5

Which of the following would be considered a cash-flow item from a "financing" activity?

A.

A cash outflow to the government for taxes

B.

A cash outflow for payment of interest

C.

A cash outflow for purchase of fixed asset

D.

A cash outflow to purchase bonds issued by another company

SOLUTION

Solution : B

A cash outflow for payment of interest would be considered a cash-flow item from a "financing" activity

Question 6

Cash flow from operating activities excludes money that is spent on capital expenditures. True or False

A.

True

B.

False

SOLUTION

Solution : A

True. Cash flow from operating activities excludes money that is spent on capital expenditures.

Question 7

When a fixed asset is bought as hire purchase, interest element is classified under ___.

A.

Operating activities

B.

Investing activities

C.

Financing activities

D.

None of these

SOLUTION

Solution : C

When a fixed asset is bought as hire purchase, interest element is classified under financing activities.

Question 8

Cash flow statement shows the activities:

A.

Operating

B.

Financial

C.

Balance Sheet

D.

All three- Operating, Financial, Balance sheet

SOLUTION

Solution : D

Cash flow statement shows the activities of - operating, financial, balance sheet items.

Question 9

The statement of cash flows clarifies cash flows according to :

A.

Operating and non-operating flows

B.

Investing and Non-operating flows

C.

Inflows and outflows

D.

Operating, investing and financing activities

SOLUTION

Solution : D

The statement of cash flows clarifies cash flows according to operating, investing and financing activities.

Question 10

Example of cash flow from financing activity is :

A.

Payment of dividend

B.

Receipt of dividend on investment

C.

Cash received from customer

D.

Purchase of fixed Asset

SOLUTION

Solution : A

Example of cash flow from financing activity is payment of dividend

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