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September 2016 exam

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › September 2016 exam

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by MikeLittle.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • February 20, 2017 at 3:17 am #373232
    Anuja Nair
    Member
    • Topics: 365
    • Replies: 353
    • ☆☆☆☆

    Hi sir, for september 2016 exam , question 11 of section A , why is the answer C . ‘Purchase of Property,plant and equipment’ is always under the heading Investing activities right ?

    February 20, 2017 at 7:49 am #373271
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    ‘Purchase of Property,plant and equipment’ is always under the heading Investing activities right ?’

    But why is that relevant to your question?

    The options are:

    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

    Given that flows from financing activities are negative and flows from operating activities are positive, they cannot both be applicable to fund the additions to non-current assets

    So your choice boils down to either B or C and since financing activities is an outflow (probably repaying debt) and operating activities is a positive inflow, the correct option can only be option C

    OK?

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