Question 31

Question text

Which of the following statements is correct relating to preparation of statement of cash flows?

a.Statement of cash flows must only be prepared using the indirect method.

b.Partnerships are not allowed to prepare a statement of cash flows.

c.Statement of cash flows shows only the investing activities of a business.

d.Statement of cash flows is prepared according to the accrual basis of accounting.

e.Statement of cash flows is prepared according to cash basis of accounting.

Question 32

Question text

Which of the following statements is incorrect relating to preparation of statement of cash flows?

a.Capitalization share issue is regarded as a cash item.

b.Depreciation is a non-cash item.

c.Loss on sale of equipment is a non-cash item.

d.Dividends received is a separately disclosable item.

e.Interest paid is a separately disclosable item.

Mimosa Ltd expects sales revenue of R20 000 and total current assets amounting to R5 000 for the coming year. The company also aims to achieve the following ratios: current ratio of 2,5:1; and acid test ratio of 2:1.

Which one of the following alternatives represents a correct amount of inventory?

Select one:

a.R1 000

b.R4 000

c.R6 000

d.R3 000

Question 34

Question text

What is the most used liquidity ratio that can be used to measure the proximity of cash position of a business?

Select one:

a.Quick ratio.

b.Current ratio.

c.Trade receivables collection period.

d.Inventory turnover.