IAI Actuarial Core Principles · Business Finance · Interpreting company accounting information
Which of the following would be classified as a financing activity in a company's cash flow statement under the usual presentation?
Proceeds from the issue of debentures are a financing activity because they are cash flows from long-term providers of capital. Customer receipts are operating, while buying or selling plant and receiving investment interest fall under investing activities.
- ACash received from customers for goods sold
- BPurchase of plant and machinery for cash
- CProceeds from issue of debenturesCorrect
- DInterest received on investments
- Proceeds from sale of old equipment
Explanation
Cash raised from or repaid to providers of capital, such as debenture issues, is financing. Customer receipts are operating, plant purchases and sale proceeds are investing, and interest received is usually treated as investing for a non-financial company.
Did you get it right without looking?
One question tells you little. A timed set on Interpreting company accounting information shows your real accuracy, how long you take and where you lose marks.
More Interpreting company accounting information questions
- A profitable company reports steadily rising profit after tax, but its net cash from operating activities has been falling for three years, …
- Which of the following is an accurate description of the stewardship role of company accounts?
- Which statement about a company with a high price-earnings ratio relative to its sector is most reasonable?
- A company's year-end balance sheet shows very low receivables and inventory because it ran a heavy discount campaign in the final month, sel…
- A profitable manufacturing company reports strongly rising profit but its net cash from operating activities has fallen sharply for two year…
- Under the indirect method of preparing a cash flow statement, which adjustment is made to profit before tax when reconciling to cash generat…