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University of Central Punjab

Financial Statements Analysis:
M.Com-III
Instructor: Shahid Nasim

Quiz
Max. Marks: 10
Max. Time: 40 Minutes

Note: Section-I contains the MCQs, each MCQ worth 0.5 each and Section-II contains
0.66 worth questions needed to be answered to the point.
Section-I
1. Which of the following cash transactions is classified as an investing activity on the statement of
cash flows?
a. Cash borrowed.
b. Cash received from issuing stock.
c. Cash received from revenue.
d. Cash collected on a loan.
2. A building costing Rs.55,000 with Rs.16,500 of accumulated depreciation was sold for Rs.40,000.
How would the cash flow from the sale appear on the statement of cash flows?
a. Rs.1,500 in operating activities and Rs.38,500 in investing activities.
b. Rs.40,000 in financing activities.
c. Rs.38,500 noncash financing and investing activities and Rs.1,500 in operating activities.
d. Rs.40,000 in investing activities.
3. The owners of X Company invested Rs.2,000 in the company. X Company used the cash to invest in
Y Company. On X’s statement of cash flows these transactions would be classified, respectively, as
a. An investing activity and an investing activity.
b. A financing activity and a financing activity.
c. An investing activity and a financing activity.
d. A financing activity and an investing activity.
4. Issuing a note for the purchase of land is an example of
a. An investing activity.
b. A financing activity.
c. A noncash investing and financing activity.
d. A transaction that would not appear on the statement of cash flows.
5. The sum of the three major components (operating activities, investing activities, and financing
activities) on a statement of cash flows will add up to
a. The ending cash balance.
b. The change in the cash account balance between the beginning and ending of the period.
c. The amount of cash inflow for the period.
d. Net income for the period.

6. Which of the following is not an activity listed in the statement of cash flows?
a. Investing Activities
b. Funding Activities
c. Operating Activities
d. Financing Activities
7. Which of the following statements is untrue regarding the statement of cash flows?
a. The statement of cash flows presents information about cash flows that the other statements
either (a) do not provide or (b) provide only indirectly.
b. Noncash transactions sometimes are reported also.
c. Either the direct or the indirect method can be used to calculate and present the net cash increase
or decrease from operating activities.
d. The indirect method derives cash flows indirectly by starting with sales revenue and "working
backwards" to convert that amount to a cash basis.
8. Stock dividends are reported in connection with a statement of cash flows as:
a. A financing activity.
b. An investing activity
c. A noncash activity.
d. Not reported on the statement of cash flows.
9. If sales revenue is Rs.20 million and accounts receivable increased by Rs.3 million, the amount of
cash received from customers:
a. Was Rs.17 million.
b. Was Rs.20 million.
c. Was Rs.23 million.
d. Depends on the proportion of cash sales and credit sales.
10. Sales revenue for Marshall Matches was Rs.240,000. The following data are from the accounting
records of Marshall:
Bad debt expense
Accounts receivable decrease
Allowance for uncollectible accounts increase
The cash received from customers was:
a.
b.
c.
d.

Rs.235,000.
Rs.244,000.
Rs.245,000.
Rs.246,000.

Rs.2,000
5,000
3,000

11. Selected information from Mercer Corporation's accounting records and financial statements for 2014
is as follows (in millions):
Cash paid to acquire equipment
Rs.18
Treasury stock purchased for cash
25
Proceeds from sale of land and buildings
45
Gain from the sale of land and buildings
26
Investment revenue received
33
Cash paid to acquire office equipment
40
On its statement of cash flows, Mercer should report net cash outflows from investing activities of:
a.
b.
c.
d.

Rs.13 million.
Rs.23 million.
Rs.38 million.
Rs.39 million.

12. Selected information from Phillips Corporation's accounting records and financial statements for
2014 is as follows (in millions):
Cash paid to retire bonds
Rs.30
Treasury stock purchased for cash
50
Proceeds from issuance of common stock 70
Proceeds from issuance of mortgage bonds 90
Cash dividends paid on common stock
25
Cash interest paid to bondholders
35
On its statement of cash flows, Phillips should report net cash inflows from financing activities of:
a.
b.
c.
d.

Rs.20 million.
Rs.55 million.
Rs.70 million.
Rs.105 million.
Section-II

1) What information can a user of financial statements obtain from the statement of cash flows?
2) Describe the three major activities the statement of cash flows reports. Cite examples of cash flows
for each activity.
3) Explain the three categories of adjustments in converting net income to cash flows from operations.
4) Describe the two methods of reporting cash flow from operations.
5) Contrast the purpose of the income statement with that of cash flow from operations.
6) Describe the computation of free cash flow. What is its relevance to financial analysis?
Best of Luck