(a) Comment on the validity of the following statement: As an asset loses its ability to provide

services, cash needs to be set aside to replace it. Depreciation accomplishes this goal. (limit

120 words)

(5 marks)

(b) How is it possible for a company to suffer a net loss for a given year, yet produce a positive

net cash flow from operating activities? (limit 120 words)

(5 marks)

(c) Describe the major purpose of a fully classified balance sheet and significant information that

can be obtained from it. (limit 120 words)

(5 marks)

(d) Cost, volume, profit analysis identifies a transactions contribution to fixed costs.

Explain the meaning of contribution and discuss the usefulness of such analysis in

making business decisions. (limit 120 words)

(5 marks)

(e) All else being equal, two companies in similar businesses can have the same current ratio yet

due to the composition of assets and liabilities have significantly different liquidity positions.

Discuss, referring to

a. Composition of assets and liabilities

b. the turnover of inventory and accounts receivable

(limit 120 words)

(5 marks)