Practice Test Geeks(CAT) Certified Accounting Technician Practice Test
← All CAT Flashcard Decks

Cash Flow Management Flashcards

7 cards from real CAT practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Cash Flow Management flashcards as text

  1. A company collects 60% of credit sales in the month of sale and 40% the following month. If January sales are $50,000 and February sales are $80,000, what are cash collections in February?

    Answer: $68,000

    February collections = 60% × $80,000 + 40% × $50,000 = $48,000 + $20,000 = $68,000.

  2. Which cash flow statement method shows individual cash receipts and payments from operating activities?

    Answer: Direct method

    The direct method lists actual cash inflows and outflows from operations, such as cash received from customers and cash paid to suppliers.

  3. A business has operating cash outflows of $120,000 and operating cash inflows of $95,000. What is the net operating cash flow and its implication?

    Answer: −$25,000; negative, potential liquidity concern

    Net operating cash flow = $95,000 − $120,000 = −$25,000, indicating the business is spending more cash than it generates from operations.

  4. Which of the following is classified as a financing activity in a cash flow statement?

    Answer: Repayment of a long-term bank loan

    Repayment of a long-term bank loan involves transactions with lenders and is therefore a financing activity.

  5. What is the primary purpose of a cash budget?

    Answer: To forecast future cash surpluses and shortfalls so management can plan financing or investment actions

    A cash budget projects cash inflows and outflows over a future period so management can anticipate and address liquidity needs.

  6. Under the indirect method, how is depreciation treated in the reconciliation of net income to operating cash flow?

    Answer: Added back to net income because it is a non-cash expense

    Depreciation reduces net income but does not require a cash outflow, so it is added back when reconciling to cash from operations.

  7. A firm has a cash conversion cycle of 45 days. If it extends its payables payment period by 10 days without changing receivables or inventory, what happens to the cycle?

    Answer: It decreases to 35 days

    The cash conversion cycle = DIO + DSO − DPO; increasing DPO by 10 days reduces the cycle from 45 to 35 days.