Accounting Cash Flow Statement Quiz
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Questions and Answers

What is the primary purpose of a statement of cash flow?

To provide relevant information about cash receipts and cash payments of an enterprise during a period.

What are the three classifications of cash flow?

Operating activities, investing activities, and financing activities.

What type of activities are categorized as operating activities?

Activities that are related to the primary revenue-generating operations of the enterprise, such as selling goods or providing services.

What type of activities are categorized as financing activities?

<p>Activities that deal with the acquisition and repayment of capital, such as issuing debt or equity.</p> Signup and view all the answers

Which of the following is NOT an example of an operating activity?

<p>Cash payments to acquire property, plant, and equipment (A)</p> Signup and view all the answers

Which of the following is an example of an investing activity?

<p>Cash receipts from sales of property, plant, and equipment (B)</p> Signup and view all the answers

Which of the following is an example of a financing activity?

<p>Cash receipts from issuing notes, bonds, mortgages, and other short or long-term borrowings (D)</p> Signup and view all the answers

The statement of cash flow can be used to assess the ability of an enterprise to generate cash and cash equivalents.

<p>True (A)</p> Signup and view all the answers

The statement of cash flow does not provide information about the financial structure of an enterprise.

<p>False (B)</p> Signup and view all the answers

The statement of cash flow is only relevant to external users like investors and creditors.

<p>False (B)</p> Signup and view all the answers

Flashcards

Statement of Cash Flow

A financial statement summarizing the cash inflows and outflows of a company over a period, categorized into operating, investing, and financing activities.

Purpose of Statement of Cash Flow

To provide information on cash receipts and payments, allowing users to assess a company's financial health, liquidity, and solvency.

Operating Activities

Cash flows primarily from the main revenue-generating business of a company, including sales, expenses, and other day-to-day activities.

Investing Activities

Cash flows relating to long-term assets or investments, such as buying or selling property, plant, and equipment, or investing in other companies.

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Financing Activities

Cash flows concerning a company's funding, including obtaining capital from owners (equity) or lenders (debt).

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Cash Inflow

Cash coming into a company.

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Cash Outflow

Cash leaving a company.

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Cash Equivalents

Short-term, highly liquid investments readily convertible to cash with very little risk of loss.

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Property, Plant, and Equipment (PP&E)

A company's tangible long-term assets used in its operations.

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Equity Financing

Raising capital by selling company ownership stake (equity) to investors.

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Debt Financing

Raising capital by borrowing money from lenders.

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Net Income

The difference between total revenue and total expenses.

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Liquidity

The ability of a company to readily meet its short-term obligations.

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Solvency

The ability of a company to meet its long-term financial obligations.

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Financial Statement

Formal records of the financial activities and position of a business.

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Sales of Goods and Services

Revenue generated from selling products or providing services.

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Selling, Administrative, and Other Expenses

Costs incurred in running the day-to-day operations of a company.

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Study Notes

Fundamentals of Accounting, Business & Management 2 (FUNABM2)

  • Course name: Fundamentals of Accounting, Business & Management 2 (FUNABM2)

The Statement of Cash Flow

  • Learning Objectives:
    • Describe the Statement of Cash Flow
    • Explain the purpose of the Statement of Cash Flow
    • Identify the 3 classifications of cash flow
    • Describe each classification of cash flow
    • Provide examples of each classification
  • Statement of Cash Flow: A basic component of financial statements that summarizes an enterprise's operating, investing and financing activities.
    • Provides information about cash receipts and cash payments during a period.

Purpose of Statement of Cash Flow

  • Primary purpose: To provide relevant information about cash receipts and cash payments of an enterprise during a period.
  • Evaluates: Changes in net assets, financial structure, liquidity and solvency of the enterprise.
  • Useful for assessing: The ability of the enterprise to generate cash and equivalents.
  • Enhances comparability: of operating performance by different enterprises.

Classification of Cash Flows

  • Cash flows: Inflows and outflows of cash and cash equivalents.
  • Classification:
    • Operating activities
    • Investing activities
    • Financing activities

Classification Of Cash Flows - Operating Activities

  • Origin: Cash derived from the principal revenue-producing activities.
  • Nature: Transactions and events for determining net income or loss.

Examples of Cash flows from Operating Activities

  • Cash receipts from sale of goods and rendering of services
  • Cash receipts from royalties, rental, fees, commissions and other revenue
  • Cash payments to suppliers for goods and services
  • Cash payments for selling, administrative and other expenses
  • Cash receipts and payments for securities held for dealing or trading purposes

Classification of Cash Flows - Investing Activities

  • Origin: Cash flows from acquisition or disposal of long-term assets and other investments, excluding cash equivalents.
  • Nature: Non-operating assets.

Examples of Cash Flows from Investing Activities

  • Cash payments to acquire property, plant and equipment, intangibles and other long-term assets.
  • Cash receipts from sales of property, plant and equipment, intangibles and other long-term assets.
  • Cash payments to acquire equity or debt instruments of other enterprises.
  • Cash receipts from sales of equity or debt instruments.

Classification of Cash Flows - Financing Activities

  • Origin: Cash flows from equity capital and borrowings.
  • Nature: Transactions between the enterprise and its owners (equity financing) and creditors (debt financing).
  • Includes: Non-trade liabilities and equity transactions.

Examples of Cash Flows from Financing Activities

  • Cash receipts from contributions by owners.
  • Cash withdrawals by owners.
  • Cash receipts from issuing notes, bonds, mortgages and other short or long-term borrowings.
  • Cash payments for amounts borrowed. (Note: payments to settle obligations like accounts payable are operating activities, not financing activities.)

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Description

Test your knowledge on the Statement of Cash Flow, a key component of financial statements. This quiz covers its purpose, classifications, and examples of cash flows. Learn how cash transactions impact financial performance and assess the liquidity of an enterprise.

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