CAT Cash Flow Management 2

Question 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?

Accepted Answer

$68,000

Answer

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

Question 2

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

Accepted Answer

Direct method

Answer

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

Question 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?

Accepted Answer

−$25,000; negative, potential liquidity concern

Answer

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

Question 4

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

Accepted Answer

Repayment of a long-term bank loan

Answer

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

Question 5

What is the primary purpose of a cash budget?

Accepted Answer

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

Answer

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

(CAT) Certified Accounting Technician Practice Test

(CAT) Certified Accounting Technician Practice Test

CAT Cash Flow Management 2