Explore topic-wise InterviewSolutions in Current Affairs.

This section includes 7 InterviewSolutions, each offering curated multiple-choice questions to sharpen your Current Affairs knowledge and support exam preparation. Choose a topic below to get started.

1.	Is It Possible For A Company To Have Positive Cash Flow But Be In Serious Financial Trouble?
Answer» Yes, it is. A company that is selling off INVENTORY but delaying payables will show positive cash flow for a while EVEN though they're in TROUBLE. Another example WOULD be where a company has strong revenues for the period but future forecasts show that revenues will decline. This would happen when a company hasn't focused on MAKING sure there were new prospects/sales in the pipeline. Yes, it is. A company that is selling off inventory but delaying payables will show positive cash flow for a while even though they're in trouble. Another example would be where a company has strong revenues for the period but future forecasts show that revenues will decline. This would happen when a company hasn't focused on making sure there were new prospects/sales in the pipeline.

Is It Possible For A Company To Have Positive Cash Flow But Be In Serious Financial Trouble?

Answer»

Yes, it is. A company that is selling off INVENTORY but delaying payables will show positive cash flow for a while EVEN though they're in TROUBLE. Another example WOULD be where a company has strong revenues for the period but future forecasts show that revenues will decline. This would happen when a company hasn't focused on MAKING sure there were new prospects/sales in the pipeline.

Yes, it is. A company that is selling off inventory but delaying payables will show positive cash flow for a while even though they're in trouble. Another example would be where a company has strong revenues for the period but future forecasts show that revenues will decline. This would happen when a company hasn't focused on making sure there were new prospects/sales in the pipeline.

Discussion

2.	Explain To Me What A Cash Flow Statement Is And How It Works.
Answer» You'll want to start with net income and then PROCEED line by line through the major adjustments (depreciation, DEFERRED taxes, and working CAPITAL changes) required to arrive at cash flow from operations. In your explanation you'll also want to mention the following: Capital expenditures, purchase of intangible assets, sale of real assets, and purchase/sale of investment securities to FIND cash flow generated from investing activies. Issuance/repurchase of dept, sale of equity, and payment of dividends to find cash flow from financing activites. Adding the cash flows from OPERATING, investing and financing activities your able to come up with the total change in cash. By taking the cash balance at the beginning of the period and adjusting it for the total change in cash you arrive at the cash balance at the end of the period. You'll want to start with net income and then proceed line by line through the major adjustments (depreciation, deferred taxes, and working capital changes) required to arrive at cash flow from operations. In your explanation you'll also want to mention the following: Capital expenditures, purchase of intangible assets, sale of real assets, and purchase/sale of investment securities to find cash flow generated from investing activies.

Explain To Me What A Cash Flow Statement Is And How It Works.

Answer»

You'll want to start with net income and then PROCEED line by line through the major adjustments (depreciation, DEFERRED taxes, and working CAPITAL changes) required to arrive at cash flow from operations. In your explanation you'll also want to mention the following: Capital expenditures, purchase of intangible assets, sale of real assets, and purchase/sale of investment securities to FIND cash flow generated from investing activies.

Issuance/repurchase of dept, sale of equity, and payment of dividends to find cash flow from financing activites.
Adding the cash flows from OPERATING, investing and financing activities your able to come up with the total change in cash.
By taking the cash balance at the beginning of the period and adjusting it for the total change in cash you arrive at the cash balance at the end of the period.

You'll want to start with net income and then proceed line by line through the major adjustments (depreciation, deferred taxes, and working capital changes) required to arrive at cash flow from operations. In your explanation you'll also want to mention the following: Capital expenditures, purchase of intangible assets, sale of real assets, and purchase/sale of investment securities to find cash flow generated from investing activies.

Discussion

3.	Why Do Capital Expenditures Increase An Organization's Assets (pp&e), While Other Expenditures, Like Paying Taxes, Employee Salaries, Utility Bills, Etc. Do Not Increase An Organization's Asset Base, But Instead Show Up As Expenses On The Income Statement That Reduce Equity Via Retained Earnings?
Answer» Unlike GENERAL expenses that PROVIDE BENEFIT over a short period time (i.e., employee's work, taxes, etc.), capital expenditures provide benefit over a longer period of time. Due to the DURATION of their estimated benefit--usually several years--capital expenditures are capitalized on the balance SHEET, where shorter term expenditures are expensed on the income statement. This is the difference between an asset and an expense. Unlike general expenses that provide benefit over a short period time (i.e., employee's work, taxes, etc.), capital expenditures provide benefit over a longer period of time. Due to the duration of their estimated benefit--usually several years--capital expenditures are capitalized on the balance sheet, where shorter term expenditures are expensed on the income statement. This is the difference between an asset and an expense.

Why Do Capital Expenditures Increase An Organization's Assets (pp&e), While Other Expenditures, Like Paying Taxes, Employee Salaries, Utility Bills, Etc. Do Not Increase An Organization's Asset Base, But Instead Show Up As Expenses On The Income Statement That Reduce Equity Via Retained Earnings?

Answer»

Unlike GENERAL expenses that PROVIDE BENEFIT over a short period time (i.e., employee's work, taxes, etc.), capital expenditures provide benefit over a longer period of time. Due to the DURATION of their estimated benefit--usually several years--capital expenditures are capitalized on the balance SHEET, where shorter term expenditures are expensed on the income statement. This is the difference between an asset and an expense.

Unlike general expenses that provide benefit over a short period time (i.e., employee's work, taxes, etc.), capital expenditures provide benefit over a longer period of time. Due to the duration of their estimated benefit--usually several years--capital expenditures are capitalized on the balance sheet, where shorter term expenditures are expensed on the income statement. This is the difference between an asset and an expense.

Discussion

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