Understanding Cash Flow Statements

Which of the following best describes the purpose of a cash flow statement?

• To show a business’s profit or loss over a period

• To summarise the inflows and outflows of cash during a specific period

• To list all assets and liabilities of a business

• To calculate the depreciation of assets

Which section of the cash flow statement would include cash received from customers?

• Investing activities

• Financing activities

• Operating activities

• Non-cash activities

Paying dividends to shareholders is classified under which section of the cash flow statement?

• Operating activities

• Investing activities

• Financing activities

• Equity activities

Which of the following is an example of a cash outflow from investing activities?

• Payment of wages

• Purchase of new equipment

• Repayment of a bank loan

• Receipt of interest income

If a business receives a loan from a bank, how is this recorded in the cash flow statement?

• As an inflow in operating activities

• As an inflow in investing activities

• As an inflow in financing activities

• As an outflow in financing activities

Which of the following would NOT appear in a cash flow statement?

• Cash paid to suppliers

• Depreciation expense

• Cash received from sales

• Cash paid for rent

What is the main difference between the direct and indirect methods of preparing a cash flow statement?

• The sections included in the statement

• The way cash flows from operating activities are calculated

• The inclusion of financing activities

• The use of Australian dollars

Which of the following is a cash inflow from financing activities?

• Sale of inventory

• Issuing shares to investors

• Purchase of a delivery van

• Payment of electricity bills

If a business pays $5,000 to purchase inventory, how is this recorded in the cash flow statement?

• Outflow in investing activities

• Outflow in financing activities

• Outflow in operating activities

• Inflow in operating activities

At the end of the cash flow statement, what does the closing balance represent?

• The total profit for the period

• The total value of assets

• The amount of cash available at the end of the period

• The total amount of equity