Q1. How does decreasing accounts payable turnover affect a company’s cash flow from financing activities and is this source of cash sustainable?

          Financing cash flow           Sustainable source

A) Increase                                        No

B) No impact                                     Yes

C) No impact                                     No

Q2. Consider the following:

Statement #1:    One approach to presenting a common-size cash flow statement is to express each inflow of cash as a percentage of total cash inflows and each outflow of cash as a percentage of total cash outflows.

Statement #2:    Expressing each line item of the cash flow statement as a percentage of revenue is useful in forecasting future cash flows.

Which of these statements regarding a common-size cash flow statement is (are) CORRECT?

A)   Both statements are correct.

B)   Only statement #1 is correct.

C)   Only statement #2 is correct.

答案和详解如下：

Q1. How does decreasing accounts payable turnover affect a company’s cash flow from financing activities and is this source of cash sustainable?

          Financing cash flow           Sustainable source

A) Increase                                        No

B) No impact                                     Yes

C) No impact                                     No

Correct answer is C)

Decreasing accounts payable turnover saves cash by delaying payments to suppliers. The result is an operating source of cash, not a financing source. Decreasing accounts payable turnover is not a sustainable source of cash flow because suppliers will refuse to extend credit, at some point, if payment is slower and slower.

Q2. Consider the following:

Statement #1:    One approach to presenting a common-size cash flow statement is to express each inflow of cash as a percentage of total cash inflows and each outflow of cash as a percentage of total cash outflows.

Statement #2:    Expressing each line item of the cash flow statement as a percentage of revenue is useful in forecasting future cash flows.

Which of these statements regarding a common-size cash flow statement is (are) CORRECT?

A)   Both statements are correct.

B)   Only statement #1 is correct.

C)   Only statement #2 is correct.

Correct answer is A)

A cash flow statement can be presented in common-size format by expressing each line item as a percentage of total revenue or by expressing each inflow of cash as a percentage of total cash inflows and each outflow as a percentage of total cash outflows. Expressing each line item of the cash flow statement as a percentage of revenue is useful in forecasting future cash flows since revenue usually drives the forecast.

答BC

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