Chapter 10 - Cash flow

Multiple-choice exercise

Choose the correct answer for each question.

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Chapter 10 – Cash flow

Question 5 Ondine

Extracts from Ondine’s balancesheets at 31 December 20X4 and 20X5 show
the following:

	20X5 £	20X4 £
Stock	37 250	36 961
Debtors	49 499	51 447
Cash at bank	8 611	10 200
	95 360	98 608
Creditors	(27 820)	(29 224)
Net current assets	67 540	69 384

Question 6 Oriel

Extracts from Oriel’s balance sheets at 31 March 20X2 and 20X3 are as
follows:

	20X3 £	20X2 £
Stock	82 930	80 370
Debtors	61 472	61 044
Cash at bank	-	103
	144 402	141 517
Creditors	65 551	70 772
Bank overdraft	10 290	-
	75 841	70 772
Net current assets	68 561	70 745

Ninian's business borrows £10 000 from the bank at an annual interest rate of 5.3%.
Three of the following six statements are correct:
1. The annual interest payment has no impact on profits
2. When the loan is taken out, Ninian's business assets increase and liabilities remain the same
3. When the loan is taken out, the asset of cash in the balance sheet is increased by £10 000
4. The annual interest payment decreases cash
5. When the loan is taken out there is no effect on assets and liabilities
6. When the loan is taken out liabilities increase by £10 000
Nestor's business sells a fixed asset for cash proceeds of £6200. The asset was originally bought for £12 250 and accumulated depreciation at the point of sale was £7265.
Three of the following six statements are correct:
1. Cash increases by £6200
2. Cash increases by £4985
3. The net book value of fixed assets decreases by £6200
4. The net book value of fixed assets decreases by £4985
5. Profits increase by £1215
6. Profits decrease by £1215
Which of the following transactions increases or decreases the net cash flow from operating activities?
1. Sale of a fixed asset
2. Purchase of stock for resale
3. Payment of interest on a loan
4. Drawings
Which of the following is not a change in a business's investment in working capital?
1. Increase or decrease in stock
2. Increase or decrease in trade creditors
3. Increase or decrease in debtors
4. Increase or decrease in intangible fixed assets
Ondine, See information. Three of the following six statements are correct:
Between 20X4 and 20X5:
1. Between 20X4 and 20X5 there has been an increase in working capital
2. Between 20X4 and 20X5 there has been a decrease in working capital
3. Between 20X4 and 20X5 there has been a cash outflow in respect of stock
4. Between 20X4 and 20X5 there has been a cash inflow in respect of stock
5. Between 20X4 and 20X5 there has been a cash outflow in respect of debtors
6. Between 20X4 and 20X5 there has been a cash inflow in respect of debtors
Oriel, see information. Three of the following six statements are correct:
1. Between 20X2 and 20X3 there has been an inflow of cash in respect of creditors
2. Between 20X2 and 20X3 there has been an outflow of cash in respect of creditors
3. Between 20X2 and 20X3 there has been an inflow of cash in respect of stock
4. Between 20X2 and 20X3 there has been an outflow of cash in respect of stock
5. Between 20X2 and 20X3 there has been an inflow of cash in respect of debtors
6. Between 20X2 and 20X3 there has been an outflow of cash in respect of debtors
Priti's business makes an operating profit of £29 975 in the year ending 31 December 20X4, after deducting £7668 for depreciation.
At 31 December 20X4 her balance sheet showed stock of £33 250, debtors and prepayments of £26 772 and creditors of £35 556. On 31 December 20X3 the corresponding figures were: stock £34 490, debtors and prepayments £22 894 and creditors £29 493.
What is the net cash inflow from operating activities to be included in Priti's cash flow statement for the year ending 31 December 20X4?
1. £33 400
2. £34 218
3. £38 588
4. £41 068
Pascal's business makes an operating profit of £28 600 in the year ending 31 May 20X6. The operating profit is after the deduction of depreciation of £3200 and amortisation of £1470.
At 31 May 20X6, the balance sheet showed stock of £42 671, debtors and prepayments of £18 007, cash at bank of £2440 and creditors of £38 765. On 31 May 20X5 the corresponding figures were: stock £41 450, debtors and prepayments £17 997, cash at bank £1385 and creditors of £39 887.
What is the net cash inflow from operating activities to be included in Pascal's cash flow statement for the year ending 31 May 20X6?
1. £26 247
2. £29 862
3. £30 917
4. £33 161
Paige's business makes a net cash inflow from operating activities of £128 400 in the year ending 31 December 20X4. During the year she has made loan repayments of £20 000 and has paid interest on the loan of £1850. Also, she sold a car for £18 000. It had been purchased originally for £33 500 and accumulated depreciation at the date of sale was £16 270. The car was immediately replaced by a new one which cost £38 750. Depreciation to 31 December 20X4 on the new car was £2421.
What was Paige's net cash inflow for the year ending 31 December 20X4?
1. £85 800
2. £88 221
3. £87 650
4. £85 030
Pamela's net cash outflow from operating activities for the year ending 31 March 20X7 was £2280. She sold fixed assets with a total net book value of £24 600 for £28 360 and purchased new fixed assets for £36 206. Pamela's drawings totalled £26 000. She received repayments of £6000 in respect of a long-term business loan she had made some years ago to one of her suppliers. Interest received in respect of this loan was £504 for the year.
What is Pamela's net cash outflow for the year ending 31 March 20X7?
1. £41 622
2. £30 630
3. £29 622
4. £33 382