Question

1. The best measure of a company's ability to generate sufficient cash is cash provided by:

            a.   financing activities.

            b.   investing activities.

            c.   operating activities.

            d.   processing activities.

            e.    None of the above.

2. A company's cash flow from investingactivities includes

a. cash paid for common dividends.

b. cash received from issuance of common stock.

c. cash received from sale of plant equipment.                       

d. cash paid for employee salaries.

e. Both a and b

3. A company's cash flow from operating activities includes

a. cash paid as dividends.

b. cash received from issuance of common stock.

c. cash received from sale of plant equipment.

d. cash paid for employee salaries

e. Both a and b

4. A company's cash flow from financingactivities includes

a. cash paid as dividends.

b. cash received from issuance of common stock.

c. cash received from sale of plant equipment.

d. cash paid for employee salaries

e. Both a and b

5. If accounts receivable decreased during the year,

            a.   revenues on an accrual basis are less than cash collected.

            b.   revenues on an accrual basis are greater than cash collected.

            c.   revenues on an accrual basis are the same as cash collected.

            d.   expenses on an accrual basis are greater than expenses on a cash basis.

            e.    None of the above.

6. If accounts payable decreased during the year,

            a.   revenues on an accrual basis are less than cash collected.

            b.   expenses on an accrual basis are less than cash paid.

            c.   expenses on an accrual basis are greater than cash paid.

            d.   expenses on an accrual basis are the same as cash paid.

            e.    None of the above.

Answer 1

1. Financing activity shows cash generated from issuance of capital.

Investing Activity shows cash generated from sale of assets.

Operating Activity shows cash generated from regular business operations.

Hence, the best measure of a company's ability to generate sufficient Cash is provided by OPERATING ACTIVITIES.

Therefore, the correct answer is c) Operating Activities.

2. Dividend paid is a financing Activity.

Issuance of stock is a financing Activity.

Sale of plant is an Investing activity.

Salary paid is an operating activity.

Therefore, the correct answer is c) cash received from sale of plant equipment.

3. Divided paid is a financing activity.

Issuance of stock is a financing Activity.

Sale of plant is an investing Activity.

Salaries paid is an operating Activity.

Therefore, the correct answer is d) cash paid for employee salaries.

4. Dividend paid is a financing Activity.

Issuance of stock is a financing Activity.

Sale of plant is an investing Activity.

Salaries paid is an operating activity.

Therefore, the correct answer is e) Both a and b

5. e.g. accouts payable decreased from 10000 to 7000 and revenue during the period was 40000.

So, revenue = 40000, cash received = 40000 + (10000-7000) = 43000

Therefore, cash received is more than the revenue.

Therefore, the correct answer is a) revenues on an accrual basis are less than cash collected.

6. e.g Accounts payable decreased from 12000 to 10000 and purchases during the year were 30000.

Then, Cash paid = 30000 + (12000-10000) = 32000

Therefore, the cash paid is more than the Expenses.

Therefore, the correct answer is b) Expenses on accrual basis are less than cash paid.