Tag: budgeting

Questions Related to budgeting

Cash outflows are costs of project and are represented by ____________.

book keeping and accountancy statement of changes in financial position meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement budgeting

  1. negative numbers

  2. positive numbers

  3. hurdle number

  4. relative number

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Correct Option: A

Which of the following is not a cash inflow?

book keeping and accountancy statement of changes in financial position meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement budgeting

  1. Purchase of fixed asset

  2. Sale of fixed asset

  3. Issue of debentures

  4. Cash from business operations

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Correct Option: A

Free cash flow is Rs 17000 and net investment in operating capital is Rs 10000 then net operating profit after taxes would be __________.

commercial studies budgeting meaning and objectives of cash flow statement statement of changes in financial position meaning merits and demerits of cash flow statement

  1. Rs 7, 000.00

  2. Rs 27, 000.00

  3. Rs - 27, 000.00

  4. Rs - 7, 000.00

Show answer
Correct Option: B

Which Accounting Standard is applicable for preparation of Cash Flow Statement?

commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

  1. Accounting Standard - 6

  2. Accounting Standard - 3

  3. Accounting Standard - 2

  4. Accounting Standard - 13

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Correct Option: B

Net investment in operating capital is Rs 5000 and net operating profit after taxes is Rs 8000 then free cash flow would be __________.

commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

  1. Rs 13, 000.00

    • Rs 3, 000.00

  3. Rs 3, 000.00

    • Rs 13, 000.00
Show answer
Correct Option: C

Free cash flow is Rs 12000, an operating cash flow is Rs 4000, an investment outlay cash flow is Rs 5000 then salvage cash flow would be _______________.

commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

  1. -Rs 21, 000.00

  2. Rs 21, 000.00

  3. -Rs 3, 000.00

  4. Rs 3, 000.00

Show answer
Correct Option: D

Which of the following transactions will result into flow of cash ?

commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

  1. Cash withdrawn from bank $Rs 71,000$.

  2. Issue of $9\%$ debentures of $Rs 1,00,000$ to the vendors of machinery.

  3. Received from debtors $Rs 74,000$

  4. Redeemed $10\%$ debentures by converting the same into equity shares.

Show answer
Correct Option: C
Explanation:

Amount received from debtors $Rs 74,000$ will be received in cash. This is the only transaction that results in flow (inflow) of cash into the business.
Why other options are incorrect? 
1. Deposit of cash into bank and withdrawal of cash from bank are merely the cash management activities of the business. They do not involve any cash flow. 
2. Conversion of debentures into equity shares is a mere change in capital structure of the company. It does not result in cash flow. 
Hence, the correct answer is option (iii). 

While preparing a fund flow statement, attention is to be given to _______.

commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

  1. Current Asset and Current Liabilities

  2. Changes in Fixed assets and Fixed Liabilities

  3. Changes in Fluctuating Capital

  4. Changes in Cash Receipts and Payments

Show answer
Correct Option: B
Explanation:
Funds Flow Statement is a statement prepared to analyse the reasons for changes in the Financial Position of a Company between two Balance Sheets. 

It shows the inflow and outflow of funds i.e. Sources and Applications of funds for a particular period.

 It is a statement which involves no error in the amount of funds inflow and outflow as it pays attention on the changes in value of fixed assets and fixed liabilities. 

Fund flow statement measures :-

commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

  1. The inflows and outflows of net assets

  2. The inflows and outflows of net working capital

  3. The inflows and outflows of working and non-working capital

  4. The inflows and outflows of cash

Show answer
Correct Option: B
Explanation:

Funds Flow Statement states the changes in the working capital of the business in relation to the operations in one time period. Net working capital is the total change in the business's working capital, calculated as total change in current assets minus total change in current liabilities.

Which of the following does not effect cash flows proposal?

commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

  1. Salvage Value

  2. Depreciation Amount

  3. Tax Rate Change

  4. Method of Project Financing

Show answer
Correct Option: D