Commerce Exam > Commerce Notes > Accountancy Class 12 > Important Questions - Cash Flow Statement (Financial Statement Analysis)
Important Questions - Cash Flow Statement (Financial Statement Analysis) | Accountancy Class 12 - Commerce PDF Download
Important Questions
Q1. The Goodwill of X ltd. increased from 2, 00,000 in 2013-14 to 3, 50,000 in 2014-15. What will be its treatment while preparing Cash Flow Statement for the year ended 31st March 2015?
(1)
Q2. Kartik Mutuals, a mutual fund company, provides you the following information:
Additional Information:
Equity Share Capital raised during the year 3,00,000
10% bank loan repaid was 1,00,000
Dividend received during the year was 20,000
Find out the cash flow from financing activities
(1)
Q3. Prepare Cash Flow Statement from the following Balance sheets and Additional information
ADDITIONAL INFORMATION:
(i) An old machinery having book value of Rs 72,000(accumulated depreciation was Rs.30,000) was sold for 56,000.
(ii) Depreciation provided on machinery during the year was Rs 28,000.
(6)
Q4. Calculate cash flow from financing activities:
Additional info:
a. Debentures were redeemed at a premium of 10%.
b. Additional preference shares were issued on 1stjuly 2011 at premium of 10%
c. Provide dividends on preference shares up to date.
d. Shares were issued at a premium of 10% and under writing commission paid was Rs.10000.
e. Dividend on equity shares made during the year was Rs 40000.
(6)
Q5. Calculate cash flow from investing activities clearly preparing the ledger accounts:
(8)
Additional Information:
(a) Patents were written off to the extent of Rs. 40,000 and some Patents were sold at a profit of Rs. 20,000.
(b) A Machine costing Rs. 1,40,000 (Depreciation provided thereon Rs. 60,000) was sold for Rs. 50,000. Depreciation charged during theyear was Rs. 1,40,000.
(c) On March 31, 2007, 10% Investments were purchased for Rs. 1,80,000 and some Investments were sold at a profit of Rs. 20,000. Interest on Investment was received on March 31, 2011.
(d) Fufu Ltd. paid Dividend @ 10% on its shares.
(e) A plot of Land had been purchased for investment purposes and let out for commercial use and rent received Rs. 30,000.
Q6 Prepare a Cash Flow Statement from the following Balance Sheet of Shuchi Diamonds Ltd.:
(8)
BALANCE SHEET OF SHUCHI DIAMONDS L TO. as at 31st March, 2014
Additional Information:
• tax paid during the year was Rs.40,000.
• A Machine costing Rs. 50,000 (depreciation provided thereon Rs. 30,000) was sold for Rs.
10,000 during the year.
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| 1. What is a cash flow statement? |  |
Ans. A cash flow statement is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents. It breaks down the company's cash inflows and outflows during a specific period and helps in understanding the company's liquidity, solvency, and financial performance.
| 2. Why is cash flow statement important in financial analysis? | |
Ans. The cash flow statement is crucial in financial analysis as it reflects the company's ability to generate cash and manage its cash flows. It helps in assessing the company's liquidity, solvency, and financial performance. It also provides insights into how the company is financing its operations and investments and whether it has enough cash to meet its obligations.
| 3. What are the three main categories in a cash flow statement? | |
Ans. The three main categories in a cash flow statement are operating activities, investing activities, and financing activities. Operating activities include cash inflows and outflows from the company's primary business operations. Investing activities include cash inflows and outflows from investments in long-term assets such as property, plant, and equipment. Financing activities include cash inflows and outflows from borrowing and repaying debt, issuing and repurchasing stock, and paying dividends.
| 4. How can a negative cash flow impact a company? | |
Ans. A negative cash flow indicates that a company is spending more cash than it's generating, which can impact its ability to meet its financial obligations. It may result in the company defaulting on its debt, delaying payments to suppliers, or reducing investments in growth opportunities. A negative cash flow can also lead to a decline in the company's stock price and shareholder confidence.
| 5. How can a company improve its cash flow? | |
Ans. A company can improve its cash flow by managing its working capital effectively, reducing unnecessary expenses, and increasing its cash inflows. It can also improve its cash flow by negotiating better payment terms with suppliers, implementing a more efficient inventory management system, and reducing its accounts receivable days. Additionally, it can consider selling non-core assets, issuing debt, or equity to increase cash inflows.
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