Fund Flow and Cash Flow Statements MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Fund Flow and Cash Flow Statements, a fundamental topic in the field of IC 89 Management Accounting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Fund Flow and Cash Flow Statements MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Fund Flow and Cash Flow Statements mcq questions that explore various aspects of Fund Flow and Cash Flow Statements problems. Each MCQ is crafted to challenge your understanding of Fund Flow and Cash Flow Statements principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 89 Management Accounting tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Fund Flow and Cash Flow Statements MCQs are your pathway to success in mastering this essential IC 89 Management Accounting topic.

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Fund Flow and Cash Flow Statements MCQs | Page 1 of 4

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Q1.
What is the primary purpose of the Fund Flow Statement?

a.

To show the movement of funds

b.

To list current assets and liabilities

c.

To analyze the profitability of an entity

d.

To summarize sources of cash flow

Discuss
Answer: (a).To show the movement of funds Explanation:The Fund Flow Statement primarily focuses on presenting the movement of funds, showing sources and applications.
Q2.
How can Fund Flow Statement be defined?

a.

A summary of assets and liabilities at a specific date

b.

Analysis of changes in financial positions between two periods

c.

Statement of cash flows for a particular year

d.

Overview of current assets and liabilities

Discuss
Answer: (b).Analysis of changes in financial positions between two periods Explanation:Fund Flow Statement provides an analysis of changes in the financial positions of an enterprise between two financial periods.
Q3.
What does "fund" refer to in the context of Fund Flow Statement?

a.

Non-current assets

b.

Current liabilities

c.

Working capital

d.

Fixed assets

Discuss
Answer: (c).Working capital Explanation:In the context of Fund Flow Statement, "fund" refers to working capital, which is the excess of current assets over current liabilities.
Q4.
How is the quantum of working capital important?

a.

It determines the firm's long-term liabilities

b.

It measures safety for short-term creditors and lenders

c.

It represents the total assets of the firm

d.

It is a measure of profitability

Discuss
Answer: (b).It measures safety for short-term creditors and lenders Explanation:The quantum of working capital is a measure of safety for short-term creditors and lenders, indicating the firm's ability to meet short-term obligations.
Q5.
What is the significance of Fund Flow Statements in relation to current and non-current assets?

a.

It determines the profitability of non-current assets

b.

It shows the conversion of non-current assets into current assets

c.

It focuses on the acquisition of current liabilities

d.

It analyzes changes in the form of current assets

Discuss
Answer: (b).It shows the conversion of non-current assets into current assets Explanation:Fund Flow Statements determine and show how non-current assets are converted into current assets through the flow of funds.
Q6.
What is the purpose of computing Funds from business operations?

a.

To determine total income

b.

To calculate net profit

c.

To assess the technical aspects of business operations

d.

To prepare a fund flow statement properly

Discuss
Answer: (d).To prepare a fund flow statement properly Explanation:The computation of Funds from business operations is done to prepare a fund flow statement properly, requiring adjustments to net profit for various items.
Q7.
Why is the computation of Funds from business operations considered technical?

a.

It involves basic arithmetic operations

b.

It requires adjustments to profit for the period

c.

It focuses on short-term financial activities

d.

It simplifies financial statements

Discuss
Answer: (b).It requires adjustments to profit for the period Explanation:The computation of Funds from business operations is considered technical as it involves adjustments to profit for the period, making it more complex.
Q8.
What is the primary purpose of the Cash Flow Statement?

a.

To list cash receipts and payments

b.

To summarize the firm's major activities

c.

To analyze the profitability of an entity

d.

To report net assets of the organization

Discuss
Answer: (a).To list cash receipts and payments Explanation:The Cash Flow Statement reports cash receipts and payments classified according to the firm's major activities, providing a summary of cash inflow and outflow.
Q9.
How is the Cash Flow Statement categorized based on the firm's major activities?

a.

Operational, Financial, and Marketing Activities

b.

Operating, Investing, and Financing Activities

c.

Primary, Secondary, and Tertiary Activities

d.

Production, Distribution, and Sales Activities

Discuss
Answer: (b).Operating, Investing, and Financing Activities Explanation:The Cash Flow Statement is categorized into Operating Activities, Investing Activities, and Financing Activities based on the firm's major activities.
Q10.
In the insurance industry, why is the Cash Flow Statement considered of prime importance?

a.

To evaluate the profitability of insurance products

b.

To assess the ability to generate cash for claims

c.

To analyze the investment portfolio

d.

To calculate premium collections

Discuss
Answer: (b).To assess the ability to generate cash for claims Explanation:In the insurance industry, the Cash Flow Statement is crucial for assessing the ability of the firm to generate cash for fulfilling claims.
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