Page 129 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting

Notes 14. Which of the following is not a part to the Statement of Cash Flows (or Cash Flow
Statement)?
(a) Operating Activities
(b) Investors’ Activities
(c) Financing Activities

(d) Supplemental Activities.
15. Which of the following is not included under operating activities?
(a) Receipts from income
(b) Payment for a new investment
(c) Payment for expenses and employees

(d) Funding of debtors.
16. Which of the following is included under cash outfl ows?
(a) Buying new assets
(b) Money the business borrows

(c) Proceeds from selling an investment
(d) None of these.
17. Which of the following is not judged about by the cash fl ow statements?
(a) Profi tability
(b) Financial condition
(c) Financial management

(d) Movement of fund

6.4 Summary

Cash flow statement indicates sources of cash inflows and transactions of cash outfl ows
prepared for a period.

It is an important tool of financial analysis and is mandatory for all the listed companies.

The cash flow statement indicates inflow and outflow in terms of three components:
(1) Operating, (2) Financing, and (3) Investment activities.

Cash inflows include sale of assets or investments, and raising of fi nancial resources.

Cash outflows include purchase lo assets or investments and redemption of fi nancial
resources.

There are two methods of converting net profit into net cash flows from operating
activities:
Direct method, and
Indirect method.

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