Pre Exam CICC Day 2

Which of the following is included - within the indirect method - to determine net cash flow from operating activities?

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

II. Net income from profit and loss statement.

III. Current loan from shareholder

IV. Proceeds of equipment purchase.

• II and III only.

• I, II and III only.

• I and II only.

• II, III and IV only.

In a UCA cash flow statement, how is total external financing calculated?

• Change in Short Term Debt + Change in Long Term Debt + Change in Owner's Equity.

• Tangible Net Worth - Total Liabilities.

• Change in Short Term Debt + Change in Long Term Debt.

• Change in Owner's Equity.

The cash flow coverage ratio is a narrower metric (i.e., it considers fewer elements) than the interest coverage ratio.

• TRUE

• FALSE

Which categories of cash inflows and outflows are represented the same way in both direct and indirect statements of cash flow?

I. Equity activities.

II. Financing activities.

III. Investing activities.

IV. Non-operating activities.

• II and III only.

• I and II only.

• I, II and III only.

• I only.

What are used in constructing a UCA cash flow statement for the most recent fiscal period?

I. The balance sheet from that period.

II. The balance sheet from the prior period.

III. The profit and loss statement from the prior period.

IV. The profit and loss statement from that period.

• I, II, III and IV.

• I, II and III only.

• I, II and IV only.

• I and III only.

What does it mean if cash-after-debt amortisation on a UCA cash flow statement is positive for a given operating period?

I. The business generated sufficient cash from normal operations to pay operating expenses, plus the interest expense and scheduled debt principal.

II. The business generated enough cash from normal operations to pay all new capital expenditures.

III. The business was unable to generate enough cash from normal operations to cover all typical operating expenses.

IV. The business is considered liquid for the period in question, because cash generated from normal operations allows it to meet its obligations.

• I and II only.

• I only.

• II and III only.

• I and IV only.

What is the UCA cash flow statement designed to indicate?

• The amount of cash movement associated with every line item on the income (profit and loss) statement.

• The amount of cash generated from sales.

• The amount of cash needed to sustain the operating cycle of a company.

• The amount of cash associated with the financing activities of a company.

What is a standstill/forbearance agreement?

• It is an agreement by all stakeholders, including the borrower, that creditors will not enforce their rights until the restructured debt is fully paid.

• It is an agreement by all stakeholders, including the borrower, that for a certain period creditors will not enforce their rights and the borrower will take certain actions.

• It is an agreement by all stakeholders, including the borrower, requiring the borrower to take certain actions as a pre-condition for restructuring.

How could a covenant breach ultimately affect the work of a borrower's auditors?

• Auditors would have difficulty signing off the business as a going concern.

• Auditors would need to add this information in the notes to the financial statement.

• If there is a covenant breach after the balance sheet, auditors might have to revise the Auditor’s Report.

What qualities should a business’s management have for a restructuring to be successful?

• The management should have general understanding of the situation and should not be easily influenced.

• The management should be focused, motivated, and going in the same direction as the lender.

• The management should be mature, understanding, and independent.