Cash Flow Statement Questions MCQs


cash flow statement Questions

Total Questions : 30

Page 1 of 2 pages
Question 1. Which of the following would be considered a cash-flow item from a "financing" activity?
  1.    A cash outflow to the government for taxes
  2.    A cash outflow for payment of interest
  3.    A cash outflow for purchase of fixed asset
  4.    A cash outflow to purchase bonds issued by another company
Answer: Option B
: B

A cash outflow for payment of interestwould be considered a cash-flow item from a "financing" activity
Question 2. Cash flow statement shows the activities:
  1.    Operating
  2.    Financial
  3.    Balance Sheet
  4.    All three- Operating, Financial, Balance sheet
Answer: Option D
: D

Cash flow statement shows the activities of -operating, financial, balance sheet items.
Question 3. Under indirect method of preparing statement of cash flows, depreciation expense affects:
  1.    Operating activities
  2.    Investing activities
  3.    Financing activities
  4.    None of these
Answer: Option A
: A

Under indirect method of preparing statement of cash flows, depreciation expense affects operating activities.
Question 4. The statement which show the cash situation is called:
  1.    Cash flow statement
  2.    Income statement
  3.    Balance sheet
  4.    None of these
Answer: Option A
: A

The statement which show the cash situation is called cash flow statement.
Question 5. The main key activity of cash flow activities is:
  1.    Operating activities
  2.    Financing Activities
  3.    Investing Activities
  4.    None of these
Answer: Option A
: A

The main key activity of cash flow activities is operating activities.
Question 6. Which of the following would not be considered a cash flow from “operating” activities?
  1.    Payments for the inventory
  2.    Interest received on loans
  3.    Tax payments
  4.    Payment of debt principle
Answer: Option D
: D

Payment of debt principlewould 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 ..............
  1.    Operating activities
  2.    Investing activities
  3.    Financing activities
  4.    None of these
Answer: Option A
: A

In the case of financial enterprises, the cash flow resulting from interestreceived should be classified as cash flow from operating activities.
Question 8. Which of the following statements are true?
  1.    Cash flow reveals only the inflow of cash
  2.    Cash flow reveals only the outflow of cash
  3.    Cash flow is a substitute for income statement
  4.    None of these
Answer: Option D
: D

None of these statements are true.
Question 9. Sale of fixed assets is ___ while calculating cash flow from investing activities.
  1.    Not treated
  2.    Added
  3.    Subtracted
  4.    None of these
Answer: Option B
: B

Sale of fixed assets is added while calculating cash flow from investing activities.
Question 10. When a fixed asset is bought as hire purchase, interest element is classified under ___.
  1.    Operating activities
  2.    Investing activities
  3.    Financing activities
  4.    None of these
Answer: Option C
: C

When a fixed asset is bought as hire purchase, interest element is classified under financing activities.
Question 11. A company sells old plant for Rs. 12,000 cash. The book value of the plant is Rs. 7,000. This transaction would affect:
  1.    Investing activities
  2.    Financing activities
  3.    Both investing and financing activities
  4.    None of these
Answer: Option A
: A

This transaction would affect investing activitiessince it is related to fixed assets
Question 12. Non-cash expenses like depreciation, depletion & amortization expense are _______ to net profit before tax under indirect method.
  1.    Not treated
  2.    Added
  3.    Subtracted
  4.    None of these
Answer: Option B
: B

Non-cash expenses like depreciation, depletion & amortization expense are added to net profit before tax under indirect method.
Question 13. The statement of cash flows clarifies cash flows according to :
  1.    Operating and non-operating flows
  2.    Investing and Non-operating flows
  3.    Inflows and outflows
  4.    Operating, investing and financing activities
Answer: Option D
: D

The statement of cash flows clarifies cash flows according to operating, investing and financing activities.
Question 14. Cash flow from operating activities excludes money that is spent on capital expenditures. True or False
  1.    True
  2.    False
  3.    A cash outflow for purchase of fixed asset
  4.    A cash outflow to purchase bonds issued by another company
Answer: Option A
: A

True.Cash flow from operating activities excludes money that is spent on capital expenditures.
Question 15. Example of cash flow from financing activity is :
  1.    Payment of dividend
  2.    Receipt of dividend on investment
  3.    Cash received from customer
  4.    Purchase of fixed Asset
Answer: Option A
: A

Example of cash flow from financing activity is payment of dividend
Question 16. Which of the following is incorrect about the statement of cash flows?
  1.    It provides information about the cash receipt and cash payments of an enterprise.
  2.    It reconciles ending cash balance with the balance as per bank statement.
  3.    It provides information about the operating, investing and financing activities
  4.    None of these
Answer: Option B
: B

It reconciles ending cash balance with the balance as per bank statementis incorrect about the statement of cash flows
Question 17. A financial statement that shows the inflows and outflows of cash during a particular period of time is known as:
  1.    Income Statement
  2.    Statement of Retained Earnings
  3.    Balance Sheet
  4.    Statement of Cash Flows
Answer: Option D
: D

A financial statement that shows the inflows and outflows of cash during a particular period of time is known as statement of cash flows.
Question 18. It’s one of the purest measures of cash sources and uses.
  1.    Operating Activities
  2.    Investing Activities
  3.    Financing Activities
  4.    None of these
Answer: Option A
: A

Operating Activities isone of the purest measures of cash sources and uses.
Question 19. In particular, which cash flow can uncover a company's true profitability?
  1.    Operating
  2.    Investing
  3.    Financing
  4.    None of these
Answer: Option A
: A

In particular, operating cash flow can uncover a company's true profitability
Question 20. Receipt of interest is to be _________ from net profit.
  1.    added
  2.    deducted
  3.    not to be treated
  4.    none of these
Answer: Option B
: B

Receipt of interest is to be deducted from net profit.