A-AS Level (CIE) Business Studies Paper-2: Specimen Questions with Answers 45 - 47 of 52
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Passage
Case Study-4
Meta company is consistently using indirect method for preparing its statement of cash flows. The comparative balance sheet and some additional information of the company are given below:
Additional Information
- Net income for the year: .
- Cash dividend declared and paid during the year: .
- Depreciation expenses for the year:
- Sold marketable securities for ; the cost was .
- Acquired plant assets for . paid in cash and a mortgage note payable was issued for the balance.
Question 45 (3 of 5 Based on Passage)
Explanation
Question 46 (4 of 5 Based on Passage)
Write in Short
Short Answer▾Why specific disclosure of cash flow from financing activities important while preparing cash flow statement?
Explanation
Cash flow from financing activities provides important information about the financial health of an organization about its plans. Positive cash flows show intentions of the organizations about the expansion and growth in future. On the other hand, negative cash flows from financing activities shows a sign of liquidity position of company if repayment of debts is made. Negative cash flows also. shows the dividend policy of the organization.
Question 47 (5 of 5 Based on Passage)
Explanation
‘Cash Equivalents’ in the Cash Flow Statement Indicates
- Cash equivalents in one entity might not be a cash equivalent in another.
- Depends on the respective cash-management programs adopted- bank and non-bank bills (highly liquid investments) typically meet the definition of cash.
- Accounts items such as accounts receivable, accounts payable any borrowings subject to a term facility or equity securities would be excluded.
‘Cash’ in the cash flow statement indicates the money in the form of currency. Which includes bills, coin, and currency notes. Both cash and cash equivalents refer to the line item on balance sheet that depicts the value of a company՚s assets that are converted into cash.