Cash Flow Statement MCQs

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MCQs 1-10

1. Which of the following items would be subtracted from net income when using the indirect method of calculating cash flows provided by operating activities?

(a) Depreciation expense

(b) Repayment of bonds payable

(d) A loss on the sale of equipment

Correct! Wrong!

2. 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 to repurchase the firm's own common stock

(d) A cash outflow to purchase bonds issued by another company

Correct! Wrong!

3. The method for presenting Net cash provided by operating activities that starts with net income and adjusts it for items that affected reported net income but that did not affect cash is called the?

(a) Direct method

(b) Working capital method

(d) Cost-benefit method

Correct! Wrong!

4. Cash paid for preferred stock dividends should be shown on the statement of cash flows under?

(a) Investing activities

(b) Financing activities

(d) Operating activities

Correct! Wrong!

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

(a) Payments for the inventory

(b) Interest received on loans

(d) Payment of debt principle

Correct! Wrong!

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

(a) Investing activities

(b) Financing activities

(d) Non cash activities

Correct! Wrong!

7. Depreciation is added back to profit when arriving at the cash flow from operating activities because?

(a) Depreciation is only an estimated amount

(b) Depreciation does not affect profit

(d) None of Above

Correct! Wrong!

8. A company purchased the land in exchange for the capital stock; it would affect which of the following?

(a) Cash flow from operating activities

(b) Cash flow from investing activities

(d) It would not affect any section

Correct! Wrong!

9. Which of the following would not represent the cash outflows for the business?

(a) Purchase of building for cash

(b) The sale of land for cash

(d) The payment of cash for dividends

Correct! Wrong!

10. The statement of cash flows does not include cash inflows and outflows for which of the following activities?

(a) Financing activities

(b) Investing activities

(d) Revenue activities

Correct! Wrong!

MCQs 11-20

11. The primary purpose of the statement of cash flows is to?

(a) Provide information about the investing and financing activities during a period

(b) Prove that revenues exceed expenses if there is a net income

(d) Facilitate banking relationships

Correct! Wrong!

12. If a company purchased treasury stock with cash, this would be reported on the statement of cash flows as?

(a) An operating cash outflow

(b) An investing cash outflow

(d) A financing cash inflow

Correct! Wrong!

13. When equipment is sold for cash, the amount received is reflected as cash?

(a) Inflow in the operating section

(b) Inflow in the financing section

(d) Outflow in the operating section

Correct! Wrong!

14. Which of the following is not an example of cash equivalents?

(a) Certificates of Deposit

(b) Money market accounts

(d) Euro Bond

Correct! Wrong!

15. Which of the following cash flows results from an operating activity?

(a) Paying dividends to stockholders

(b) Repaying note payable

(d) Purchasing equipment

Correct! Wrong!

16. Which of the following cash flows results from a financing activity?

(a) Receiving dividends on investment in another company

(b) Repaying long-term debt

(d) Receiving payment from a customer

Correct! Wrong!

17. Which of the following cash flows results from a financing activity?

(a) Borrowing money from the bank

(b) Receiving a stock dividend worth Rs. 3 per share

(d) All of the above result from financing activities

Correct! Wrong!

18. The two approaches to reporting cash flows provided by operating activities are?

(a) Direct and indirect methods

(b) The basic and standard methods

(d) The liquidity and profitability methods

Correct! Wrong!

19. In preparing cash flows provided by operating activities using the indirect method, which of the following items is added to net income?

(a) Non-cash expenses such as depreciation

(b) Gains on investing and financing transactions

(d) Decreases in current liability balances

Correct! Wrong!

20. Which of the following would be considered an investing activity and a source of cash?

(a) Purchase of equipment

(b) Sale of BBB’s stock held as an investment

(d) Receipt of interest on savings account

Correct! Wrong!

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References

Mukharji, A., & Hanif, M. (2003). Financial Accounting (Vol. 1). New Delhi: Tata McGraw-Hill Publishing Co.

Narayanswami, R. (2008). Financial Accounting: A Managerial Perspective. (3rd, Ed.) New Delhi: Prentice Hall of India.

Ramchandran, N., & Kakani, R. K. (2007). Financial Accounting for Management. (2nd, Ed.) New Delhi: Tata McGraw Hill.

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Shoriful Islam on April 20, 2021 at 5:50 am

I am confused to answer of question 11. The primary purpose of the statement of cash flows is to?
(a) Provide information about the investing and financing activities during a period
(b) Prove that revenues exceed expenses if there is a net income
(c) Provide information about the cash receipts and cash payments during a period
(d) Facilitate banking relationships
The Given answer is A
Shouldn’t be option C instead of A ?
Reply
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Cash Flow Statement MCQs

MCQs 1-10

1. Which of the following items would be subtracted from net income when using the indirect method of calculating cash flows provided by operating activities?

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

3. The method for presenting Net cash provided by operating activities that starts with net income and adjusts it for items that affected reported net income but that did not affect cash is called the?

4. Cash paid for preferred stock dividends should be shown on the statement of cash flows under?

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

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

7. Depreciation is added back to profit when arriving at the cash flow from operating activities because?

8. A company purchased the land in exchange for the capital stock; it would affect which of the following?

9. Which of the following would not represent the cash outflows for the business?

10. The statement of cash flows does not include cash inflows and outflows for which of the following activities?

MCQs 11-20

11. The primary purpose of the statement of cash flows is to?

12. If a company purchased treasury stock with cash, this would be reported on the statement of cash flows as?

13. When equipment is sold for cash, the amount received is reflected as cash?

14. Which of the following is not an example of cash equivalents?

15. Which of the following cash flows results from an operating activity?

16. Which of the following cash flows results from a financing activity?

17. Which of the following cash flows results from a financing activity?

18. The two approaches to reporting cash flows provided by operating activities are?

19. In preparing cash flows provided by operating activities using the indirect method, which of the following items is added to net income?

20. Which of the following would be considered an investing activity and a source of cash?

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