Pre Exam CICC Day 1

According to the indirect method, which element is included to determine net cash flow from operating activities?

I. Property and equipment purchase.

II. Cash impact of changes in short-term balance sheet accounts.

III. Loans from directors.

IV. Net income.

• II and IV only.

• I, II, III and IV.

• I, II and IV only.

• II and III only.

How does a cash flow statement differ from a profit and loss statement?

• It reflects future performance, whereas the profit and loss statement reflects past results.

• It includes changes in balance sheet accounts, whereas the profit and loss statement does not.

• It excludes the operating expenses found on the profit and loss statement.

• It shows the results from multiple time periods, whereas the profit and loss statement covers one operating period.

Which statement about the cash flow coverage ratio is not correct?

• It focuses on internal cash flow.

• It is a broader metric than the interest coverage ratio.

• It uses accrual income values from the profit and loss statement.

• It is an indicator of the ability to pay interest, dividends and scheduled debt payments.

EBITDA comes closest to approximating operating cash flow under which business condition?

• Relatively stable operations year-to-year.

• Rapid growth.

• Rapid contraction.

• Volatile profitability.

One cash flow measure is as good as another when assessing a business's credit risk, as they all illustrate the same key analytical points with equal clarity.

• TRUE

• FALSE

Identify the correct statements.

I. The cash flow required to support inventory (stock) increases on a relative basis if inventory (stock) turnover accelerates.

II. The cash flow required to support inventory (stock) decreases on a relative basis if inventory (stock) turnover slows.

III. The cash flow required to support inventory (stock) increases on a relative basis if inventory (stock) turnover slows.

IV. The more quickly inventory (stock) is sold, the less cash flow is needed to support inventory (stock).

• I and IV only.

• II and IV only.

• III and IV only.

• I and II only.

Which components are included in the calculation of "free cash flow"?

I. Interest expense.

II. Depreciation.

III. Capital expenditures.

IV. Amortisation.

• II and IV only.

• I and II only.

• II, III and IV only.

• I and III only.

The calculation of the cash flow coverage ratio includes which components?

I. Dividends.

II. Net income (NPAT) from the current period.

III. Net income (NPAT) from the prior period.

IV. Net cash after operations from the UCA cash flow statement.

• I, II and IV only.

• I and II only.

• II and III only.

• I and IV only.

Cash payments and receipts are classified in a cash flow statement. What is not one of the classifications?

• Overhead activities.

• Financing activities.

• Investing activities.

• Operating activities

Which cash flow statement format is used commonly among small business and commercial lenders?

• There is no most commonly used format.

• Direct.

• UCA

• Indirect.