Question

For a newly established and growing entity, what would the expected

cash flows be from the three separate activities?

Answer 1

For a newly established entity, the expected cash flows from the 3 different activities would be as below:

1. Cash Flows from Operating activities: Cash outflows due to :

a) Increase in debtors

b) Increase in inventory

c) Increase in other current assets

Cash inflows would be due to:

a) Increase in Creditors

2. Cash Flows from Investing Activities:

Cash outflows due to

a) Purchase of Fixed Assets

b) Purchase of investment

3. Cash flows from Financing Activities. Cash inflows due to :

a) Issue of share capital

b) Receipt of loan from the bank

c) Issue of Debentures