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 2 of 4

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Q11.
What is required for an insurance company to prepare a Cash Flow Statement?

a.

Solvency and liquidity

b.

Regulatory norms and forms

c.

Profitability and market share

d.

Investment portfolio

Discuss
Answer: (b).Regulatory norms and forms Explanation:An insurance company needs to prepare a Cash Flow Statement in accordance with regulatory norms and forms.
Q12.
In which method should an insurance company prepare its Cash Flow Statement according to IRDA regulations?

a.

Indirect Method

b.

Direct Method

c.

Operating Method

d.

Investment Method

Discuss
Answer: (b).Direct Method Explanation:As per IRDA regulations, an insurance company should prepare its Cash Flow Statement in the Direct Method, where AS 3 will not be applicable.
Q13.
How is "Cash" defined?

a.

Cash on hand and demand deposits with banks

b.

Investments in the stock market

c.

Revenue generated from sales

d.

Long-term assets of the organization

Discuss
Answer: (a).Cash on hand and demand deposits with banks Explanation:"Cash" comprises cash on hand and demand deposits with banks of the corporate office and its operational units.
Q14.
What are Cash Equivalents?

a.

Long-term investments for future growth

b.

Highly liquid investments subject to significant value changes

c.

Investments held for long-term purposes

d.

Short-term, highly liquid investments with insignificant value changes

Discuss
Answer: (d).Short-term, highly liquid investments with insignificant value changes Explanation:Cash equivalents are described as short-term, highly liquid investments that are readily convertible into known amounts of cash and have an insignificant risk of changes in value.
Q15.
How are Cash Flows defined?

a.

Inflows and outflows of goods and services

b.

Inflows and outflows of cash and cash equivalents

c.

Investments and financing activities

d.

Revenue and expenses

Discuss
Answer: (b).Inflows and outflows of cash and cash equivalents Explanation:Cash Flows refer to inflows and outflows of cash and cash equivalents, representing the movement of cash into and out of the organization.
Q16.
What are Operating Activities?

a.

Investing and financing activities

b.

Principal revenue-producing activities and other non-operating activities

c.

Long-term planning and strategy formulation

d.

Short-term commitments and investments

Discuss
Answer: (b).Principal revenue-producing activities and other non-operating activities Explanation:Operating Activities are defined as the principal revenue-producing activities of a firm and other activities that are not investing or financing activities.
Q17.
In an insurance company, what does cash flow from operating activities indicate?

a.

Profitability of investment portfolio

b.

Extent to which operations generate sufficient cash flows

c.

Long-term growth potential

d.

Effectiveness of marketing strategies

Discuss
Answer: (b).Extent to which operations generate sufficient cash flows Explanation:In an insurance company, cash flow from operating activities is a key indicator of the extent to which the operations have generated sufficient cash flows to maintain the operating capability of the insurers.
Q18.
What is the primary focus of Investing Activities?

a.

Short-term commitments

b.

Acquisition and disposal of long-term assets and other investments

c.

Principal revenue-producing activities

d.

Financing and borrowing activities

Discuss
Answer: (b).Acquisition and disposal of long-term assets and other investments Explanation:Investing activities involve the acquisition and disposals of long-term assets and other investments not included in cash equivalents.
Q19.
Which of the following is an example of a cash flow from Investing Activities?

a.

Cash payment for salaries

b.

Cash payment for purchase of fixed assets

c.

Cash receipt from interest received

d.

Cash payment for operating expenses

Discuss
Answer: (b).Cash payment for purchase of fixed assets Explanation:Cash payment for the purchase of fixed assets is an example of a cash flow from investing activities.
Q20.
What defines Financing Activities?

a.

Activities related to short-term borrowings

b.

Activities resulting in changes in the size and composition of owners' capital and borrowings

c.

Principal revenue-producing activities

d.

Acquisition and disposal of long-term assets

Discuss
Answer: (b).Activities resulting in changes in the size and composition of owners' capital and borrowings Explanation:Financing Activities are activities that result in changes in the size and composition of owners' capital and borrowings.
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