Free Cash Flow Statement 03 Practice Test - 12th Grade - Commerce 

Question 1

Cash proceeds from issue of shares will result in cash _________ from financing activities.

A.

Inflow

B.

Outflow

C.

Either inflow or outflow

D.

None of these

SOLUTION

Solution : A

Cash proceeds from issue of shares will result in cash inflow from financing activities.

Question 2

For non-financing company, the payment of interest is a/an _______

A.

Operating activity

B.

Investing activity

C.

Financing activity

D.

None of these

SOLUTION

Solution : C

For non-financing company, the payment of interest is a financing activity.

Question 3

Decrease in current assets are ________ under indirect method.

A.

Not treated

B.

Added

C.

Subtracted

D.

None of these

SOLUTION

Solution : B

Decrease in current assets are added under indirect method.

Question 4

In the long run, a business must generate positive net cash flow from which of the following activities, if it is to survive?

A.

Operating activities

B.

Investing activities

C.

Financing activities

D.

Non cash activities

SOLUTION

Solution : A

In the long run, a business must generate positive net cash flow from operating activities, if it is to survive.

Question 5

Cash Flow Statement useful for _____.

A.

Short term financial planning only

B.

Ascertaining cash flow from various activities separately only 

C.

Both:
Short term financial planning
Ascertaining cash flow from various activities separately

D.

None of these

SOLUTION

Solution : C

Cash flow statement useful for both short term financial planning and  ​​​​ascertaining cash flow from various activities separately

Question 6

Which of the following would not be considered a cash flow from “operating” activities?

A.

Payments for the inventory

B.

Interest received on loans

C.

Tax payments

D.

Payment of debt principle

SOLUTION

Solution : D

Payment of debt principle would not be considered a cash flow from “operating” activities

Question 7

In the case of financial enterprises, the cash flow resulting from interest received should be classified as cash flow from ..............

A.

Operating activities

B.

Investing activities

C.

Financing activities

D.

None of these

SOLUTION

Solution : A

In the case of financial enterprises, the cash flow resulting from interest received should be classified as cash flow from operating activities.

Question 8

The main key activity of cash flow activities is:

A.

Operating activities

B.

Financing Activities

C.

Investing Activities

D.

None of these

SOLUTION

Solution : A

The main key activity of cash flow activities is operating activities.

Question 9

An example of cash flow from investing activity is :

A.

Issue of debenture

B.

Repayment of long term loan

C.

Purchase of raw materials for cash

D.

Sale of investment by non-financial enterprise

SOLUTION

Solution : D

An example of cash flow from investing activity is sale of investment by non-financial enterprise.

Question 10

An example of cash flow from operating activity for financing company:

A.

Payment of dividend

B.

Sale of fixed assets

C.

Payment of interest 

D.

Issue of equity share capital

SOLUTION

Solution : C

Payment of interest is an example of cash flow from operating activity for financing company.

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