Question

1.       Which of the following are not examples of a non-operating cash flows for a restaurant business?

a)      Cash from the sale of fixed assets

b)      Cash from a shareholder loan

c)       Payment for replacement glassware

d)      Proceeds from the issuing of share capital

e)      Payment of corporate taxation

2.       True or False? When using the Receipts and Payments Approach, the operations cash flow budget includes accruals for un-invoiced expenses.

a)      True

b)      False

3.       True or False? If cash sales represent 40% of each month’s sales and credit card sales collected in the month of sale are 25% of non-cash sales, while the remaining 75% of sales are made to corporate accounts and are collected in the month following the month of sale, credit card sales are €15.750 if total sales are €105,000.

a)      True

b)      False

4.       True or False? In a typical hotel operation, preparation of the operations cash budget will generally be the responsibility of the finance department.

a)      True

b)      False

5.       True or False? Capital budgets are prepared for periods that match the period covered by the operations cash budget.

a)      True

b)      False

Answer 1

1 - C - payment for replacement of glassware is an operating cash-flow. Non-operating cash flows do not relate to day-to-day operations.

2. False, receipts and payment approach includes only cash transactions

3. Cash sales = 40% of 105,000 = 42000 , Non-Cash Sales = 63000, Credit sales = 25% of 63000 = 15,750

so answer is True. Note there shud be a comma after 15 and not a period €15.750

4. True, Cash budget involves day-to-day operations and requires inputs from each department to Finance team. Ultimately, Finance department projects cash flows.

5. False. Capital budgets could cover long-term periods whereas cash budgets are generally short-term.