Week 11: Cash Flow Statements

Question 1

Items impacting profit but not cash (3)

Answer 1

1) Depreciation
2) Loss on sale of a non-current asset
3) Gain on sale of a non-current asset

Question 2

Items impacting cash but not profit (5)

Answer 2

1) Cash proceeds received from the sale of non current assets
2) Cash paid for the purchase of non current assets
3) Cash coming into the business from new share capital
4) Cash coming into the business from taking a loan
5) Cash paid to repay loans

Question 3

Operating activities (5)

Answer 3

1) Cash receipts from sale of goods
2) Cash receipts from royalties, fees, other revenue
3) Cash payments to suppliers of goods/services
4) Cash payments to employees
5) Cash payments/refunds of taxes

Question 4

Investing Activities (4)

Answer 4

1) Cash payments to purchase non-current assets
2) Cash receipts from the disposal of non-current assets
3) Cash advances and loans made to other parties
4) Cash receipts from the repayments of advances and loans made to other parties

Question 5

Financing activities (5)

Answer 5

1) Cash receipts from share issues
2) Cash receipts from issuing debentures and other borrowings
3) Cash payments on redemption of shares
4) Cash payments on repaying amounts borrowed
5) Cash payments under leases

Question 6

Direct versus Indirect

Answer 6

Main difference
- The calculation of operating cash flow activities.

Indirect
- Deals with operating profit and adjusts for movements in working capital & non-cash items (Depreciation)

Direct
- Deals with cash receipts and payments - beneficial in predicting bankruptcy or future liquidation

Question 7

Interest and dividends

Answer 7

• Classified as either operating or financing cash flows

Question 8

Additional notes required by IAS 7

Answer 8

1) Major non cash transactions
2) Components of cash and cash equivalents
3) Segmental information (optional to disclose cash flow information for each business or geographical segment)