121. Any change in Current Liabilities will affect an inverse change in the working capital.
True
False
none
none
Answer.1. True
Explanation:
Current liabilities are an inflow of funds and would reduce the burden on working capital. And as such increases in current liabilities would decrease working capital needs. A decrease in current liabilities, on the other hand, would need funds for payment; hence would increase the requirement for working capital. Current liabilities have an inverse impact on the working capital requirements. It is now a matter of child’s play to prepare the schedule.
122. From the following details find out the funds from operations: Net Profit after Tax Rs. 48,000 Depreciation Rs. 30,000 Loss on Sale of Outdated Machinery: Rs. 4000
Rs. 82,000
Rs. 22,000
Rs. 74,000
Rs. 14,000
Answer.1. Rs. 82,000
Explanation:
Total fund from operation = Net profit + depreciation + Loss
= 48000 + 30000 + 4000
= Rs. 82,000
123. From the following details find out the fund from operations at Rs. 2,500 Accumulated Depreciation Rs. 2,900 Retained Earning Rs. 4,200 Goodwill Written off Rs. 300 Profit on Sale of Fixed Assets Rs. 200
Rs. 9,900
Rs. 9,600
Rs. 9,700
Rs. 5,100
Answer.3. Rs. 9,700
Explanation:
Fund from operations = Depreciation + earning + ( Good will – PL of fixed assets)
= 2500 + 2900 + 4200 + (300 -200)
= Rs. 9,700
124. Funds Flow Statement indicates the necessity of arranging external funds in advance if the projected outflow is more than the inflow.
True
False
Can’t say
none
Answer.1. True
Explanation:
Fund flow is the sum of all cash inflows/outflows from and into different financial assets. Fund flow is usually calculated on a monthly or quarterly basis; no account is taken of the output of an asset or fund. It is only the share redemptions or outflows, and share purchases or inflows.
125. Any change in the Current assets is positively correlated to the change in working capital
True
False
Can’t say
none
Answer.1. True
Explanation:
Current assets are those assets that are converted into cash within one year normally. Any change in the Current assets is positively correlated to the change in working capital.
126. Non-cash adjustments like Depreciation, Preliminary Expenses, and Goodwill Written off are shown on the debit side of which account?
Balance Sheet
Funds Flow Statement
Adjusted Profit and Loss Account
Working Capital Statement
Answer.3. Adjusted Profit and Loss Account
Explanation:
Non-cash adjustments like Depreciation, Preliminary Expenses, and Goodwill Written off are shown on the debit side adjusted Profit and Loss Account.
The non-fund items are those which may be operational expenses but they do not affect funds of the business, e.g., for depreciation charged to the Profit and Loss Account, funds really do not move out of business.
Non-operating items are those which may result in the outflow of funds but are not related to the trading operations of the business. Such as Loss on Sale of Machinery or Payment of Dividends. Funds from operations are computed by adjusting the Net Profit figure from above various items.
127. Part of the Profit transferred to General Reserve will be shown on the debit side of _________
Balance Sheet
Funds Flow
Cash Flow
Adjusted Profit and Loss Account
Answer.4. Adjusted Profit and Loss Account
Explanation:
Part of the Profit transferred to the General Reserve will be shown on the debit side of the Adjusted Profit and Loss Account.
The non-fund items are those which may be operational expenses but they do not affect funds of the business, e.g., for depreciation charged to the Profit and Loss Account, funds really do not move out of business.
Non-operating items are those which may result in the outflow of funds but are not related to the trading operations of the business. Such as Loss on Sale of Machinery or Payment of Dividends. Funds from operations are computed by adjusting the Net Profit figure from above various items.
128. A projected Funds Flow Statement informs the management about
Future Financial Stringency
Future Requirement of Funds
Funds Position of the Company
All of the above
Answer.4. All of the above
Explanation:
A company’s cash flow and fund flow statements reflect two different variables during a specific period of time. The cash flow will record a company’s inflow and outflow of actual cash (cash and cash equivalents). The fund flow records the movement of cash in and out of the company.
A projected Funds Flow Statement informs the management about
Future Financial Stringency
Future Requirement of Funds
Funds Position of the Company
129. Funds Flow Statement can be prepared in which form?
Vertical Form
Horizontal Form
Complex Form
Both 1 and 2
Answer.4. Both 1 and 2
Explanation:
The fund flow statement can be prepared in the vertical format as well as horizontal format.
130. The funds flow statement is based on _______which is of limited utility for future planning is a limitation of funds flow statement.
Historical Facts
Traditional Facts
Hypothetical Facts
Current Facts
Answer.1. Historical Facts
Explanation:
The funds flow statement is based on Historical Facts which are of limited utility for future planning and is a limitation of the funds flow statement.
A fund flow statement is a statement prepared to analyze the reasons for changes in the financial position of a company between two balance sheets.