Cash Management

The carrying amount of non-current assets on 1 January was £125,000 and the statement of financial position at 31 December shows non-current assets of £152,000. During the year £12,500 depreciation was charged. There were no non-current asset disposal . What was the cash paid to acquire non-current assets in the year ended 31 December?

• £12,500

• £14,500

• £27,000

• £39,500

A business decides to sell one of its machines. The machine being sold originally cost £64,400. At the date of disposal, accumulated depreciation on the machine amounts to £38,640. The machine is sold for £23,800.

What was the profit or loss on disposal of the machine?

• £1,960 profit

• £1,960 loss

• £14,840 profit

• £14,840 loss

Which of the following statements about working capital (WC) is correct?

• WC is the difference between a company's total assets and its total

  liabilities

• WC is the difference between a company's total assets and its

  current liabilities

• WC is the difference between a company's current assets and its

  total liabilities

• WC is the difference between a company's current assets and its

  current liabilities

Which of the following is not classed as working capital?

• Bank loan

• Overdraft

• Inventory

• Accruals

A business has a working capital cycle of 76 days. This is based on an inventory holding period of 65 days, trade receivables’ collection period of 55 days and trade payables’ payment period of 44 days. The Finance Director of the business wants to improve this.

Which of the following will have the effect of shortening the working capital cycle of the business?

• Taking advantage of early settlement discounts offered by suppliers

• Offering an early settlement discount to customers

• Increasing the cash balance held in the business’s current account

• Increasing the credit terms offered to customers from 30 days to 60 days

During the year ending 30 June a business had a working capital cycle of 87 days. It had a trade

receivables’ collection period of 77 days and trade payables’ payment period of 41 days.

What is the inventory holding period of the business, in days?

• 31 days

• 36 days

• 46 days

• 51 days

Kitten Ltd buys raw materials on three months’ credit, holds them in store for four months and then issues them to production.

The production cycle is a couple of days, and then finished goods

are held for one month before they are sold. Credit customers are normally allowed two months’ credit.

What is Kitten Ltd’s approximate working capital cycle in months?

• 1 month

• 2 months

• 3 months

• 4 months

Which of the following can cause differences between cash and profit

• Accruals and prepayments

• bank overdraft and bank loan

• depreciation of non current assets

• Purchase and Sale of non current assets

• All of them

If a business has a surplus of cash, it may want to use cash to

purchase the non-current asset. Paying cash is not a suitable method

if the business is short of cash.

• True

• False

......................................................This involves supplying part cash and part goods. For example, a

business may want to upgrade a piece of machinery to a newer model

by trading in the old machine and paying additional cash.