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Cash Flow MOQ Sept 2016

GGabbi9y ago
Dear Mike, Below is one of the MOQ from Sept 2016. The correct answer is C, but unfortunately I could not understand why. I read all the options and I could not see why the others were are wrong. Could you please explain it to me. Thanks in advance 11 Top Trades Co has been trading for a number of years and is currently going through a period of expansion. An extract from the statement of cash flows for the year ended 31 December 20X7 for Top Trades Co is presented as follows: $’000 Net cash from operating activities 995 Net cash used in investing activities (540) Net cash used in financing activities (200) Net increase in cash and cash equivalents 255 Cash and cash equivalents at the beginning of the period 200 Cash and cash equivalents at the end of the period 455 Which of the following statements is correct according to the extract of Top Trades Co’s statement of cash flows? A The company has good working capital management B Net cash generated from financing activities has been used to fund the additions to non-current assets C Net cash generated from operating activities has been used to fund the additions to non-current assets D Existing non-current assets have been sold to cover the cost of the additions to non-current assets Gabriella
MikeLittleMikeLittleTutor9y ago#1
Option A - for operating activities flows to be positive suggests that: Receivables have decreased Payables have increased and Inventory has decreased For an entity that is currently going through a period of expansion you would expect receivables and inventory also to have increased particularly inventory as a direct rsult of payables increasing Option B - financing activities is a negative flow suggesting repayment of loans or redemption of shares. An outflow of financing cash cannot have been used to finance NCA Option D - If the proceeds of sale of existing NCA had been used to cover to acquisition of new NCA, there would not have been any movement in the investing activities OK?
GGabbi9y ago#2
Yes Thanks and Regards Gabriella
MikeLittleMikeLittleTutor9y ago#3
You're welcome
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