JAIIB Exam 2025 – AFM Important Questions MCQs Quiz-16

28/03/2025

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JAIIB Exam 2025 AFM Important Questions MCQs Quiz-16

JAIIB Exam Quiz 2025: The JAIIB exam is scheduled for 2025 by IIBF. Here, we are providing JAIIB AFM MCQ-based quizzes on a regular basis. You can attempt the quizzes regularly to prepare for the upcoming JAIIB exam. The quizzes will be provided module-wise and unit-wise. You can attempt the JAIIB AFM quizzes from the links below and improve your preparation by practicing regularly. These quizzes will help you boost your score in the JAIIB exam and guide you to clear the exam on your first attempt.

Q.1 Which of the following best describes Operating Activities according to standard financial reporting frameworks like IFRS or US GAAP?
A) Activities that include the purchase and sale of long-term assets and other investments not included in cash equivalents.
B) Principal revenue-producing activities of the entity and other activities that are not classified as investing or financing activities.
C) Activities that result in changes in the size and composition of the contributed equity and borrowings of the entity.
D) Activities related to issuing shares, paying dividends, and obtaining loans.

Q.2 Which of the following is the most accurate description of Investing Activities in the context of a company’s cash flow statement?
A) Activities involving the acquisition and disposal of long-term assets and other investments not classified as cash equivalents.
B) Activities that primarily generate cash inflows from the principal revenue-producing operations of an entity.
C) Activities that result in inflows and outflows from borrowing, repaying, and equity-related transactions.
D) Activities related solely to the issuance of share capital and distribution of dividends to shareholders.

Q 3 Which of the following best defines Financing Activities as per financial reporting standards?
A) Activities that involve cash flows from transactions affecting the size and composition of contributed equity and borrowings of the entity.
B) Activities that include purchasing and selling property, plant, and equipment.
C) Activities directly related to producing and selling goods and services.
D) Activities involving cash management through short-term, highly liquid investments.

Q.4 Which of the following statements best explains how changes in current assets and current liabilities affect cash flows from Operating Activities?
A) An increase in current assets (excluding cash) generates cash, while an increase in current liabilities consumes cash.
B) A decrease in current liabilities results in cash generation, while a decrease in current assets (excluding cash) results in cash outflow.
C) An increase in current assets (excluding cash) represents cash consumption, while an increase in current liabilities results in cash generation.
D) Changes in current assets and current liabilities have no impact on cash flows from operating activities.

Q.5 Which of the following is generally classified as a cash flow from operating activities under standard financial reporting frameworks?
A) Cash payments to acquire property, plant, and equipment.
B) Cash receipts from royalties, fees, commissions, and other revenue.
C) Cash advances for acquiring a long-term investment in another company.
D) Cash repayments of borrowings.

Q.6 What is the primary reason why enterprises generally prefer not to maintain excessively high cash balances for extended periods?
A) Cash balances create tax liabilities for the company.
B) Excessive cash balances reduce the company’s liquidity ratios.
C) Cash is a non-earning, unproductive asset unless it is invested to generate returns.
D) Cash is subject to depreciation like tangible fixed assets.

Q.7 Which of the following transactions would typically be classified as cash flows from investing activities?
A) Cash payments for the acquisition of property, plant, and equipment, including self-constructed assets.
B) Cash payments of interest on borrowings for financing property, plant, and equipment.
C) Cash receipts from issuing equity shares to raise capital.
D) Cash receipts from selling goods as part of normal trading operations.

Q.8 Which of the following is an example of a cash flow from financing activities?
A) Cash payments to purchase equipment used in production.
B) Cash receipts from the sale of inventory to customers.
C) Cash proceeds from issuing debentures or bonds.
D) Cash payments for research and development costs capitalized as intangible assets.

Q.9 According to Ind AS-7 on the statement of cash flows, which of the following statements is correct regarding the reporting of cash flows from operating activities?
A) Entities must report cash flows using only the direct method as mandated by Ind AS-7.
B) The indirect method adjusts cash flows by removing all investing and financing cash flows from net income.
C) Entities may choose between the direct method and the indirect method for reporting cash flows from operating activities.
D) The indirect method only considers cash receipts and cash payments without any adjustments to profit or loss.

Q.10 According to Ind AS-7, which of the following is excluded from the statement of cash flows?
A) Cash flows from taxes on income
B) Movements between items that constitute cash or cash equivalents
C) Cash proceeds from issuing bonds
D) Cash payments to acquire intangible assets

Q.11 A company provides the following information:
•Operating income (EBIT): ₹500,000
•Depreciation: ₹50,000
•Loss on sale of long-term asset: ₹20,000
•Decrease in accounts receivables: ₹30,000
•Decrease in accounts payable: ₹15,000
•Increase in inventory: ₹25,000
•Increase in accrued expenses (a current liability): ₹10,000
What is the cash flow from operating activities?
A) ₹570,000
B) ₹470,000
C) ₹370,000
D) ₹270,000

Q.12 A company reports the following information:
•Net cash flow from operating activities (A): ₹570,000
•Proceeds from sale of long-term assets: ₹100,000
•Purchase of new long-term assets: ₹200,000
What is the net cash flow before financing activities?
A) ₹370,000
B) ₹470,000
C) ₹670,000
D) ₹570,000

Q.13 A company has provided the following data:
•Net cash flow from operating activities (A): ₹570,000
•Net cash flow from investing activities (B): ₹(100,000)
•Financing activities:
• Payment of dividend: ₹(50,000)
• Increase in equity: ₹80,000
• Decrease in borrowings: ₹(30,000)
What is the net increase in cash and cash equivalents for the period?
A) ₹470,000
B) ₹470,000
C) ₹570,000
D) ₹500,000

Q.14 Which of the following statements correctly explains the fundamental relationship in a Funds Flow Statement?
A) Any increase in assets or increase in liabilities is considered a source of funds.
B) Any decrease in assets or increase in liabilities is considered a source of funds.
C) Any increase in assets or decrease in liabilities is considered a source of funds.
D) Cash is always treated as a source of funds, regardless of its change.

Q.15 Which of the following is a key distinction between a Cash Flow Statement and a Funds Flow Statement?
A) Cash Flow Statement uses the accrual system while Funds Flow Statement uses the cash system.
B) Cash Flow Statement is primarily used for long-term financial planning, while Funds Flow Statement helps understand short-term liquidity.
C) Cash Flow Statement is an integral part of financial statements and shows cash flows from operating, financing, and investing activities separately, while Funds Flow Statement focuses on changes in working capital and is not mandatory.
D) Funds Flow Statement helps in determining cash balance at the end of the period, while Cash Flow Statement assesses changes in working capital.

Q.16 While preparing a Funds Flow Statement, which of the following correctly identifies how sources and applications of funds are determined from comparative balance sheets?
A) Sources are indicated by an increase in both assets and liabilities, while applications are indicated by a decrease in both.
B) Sources are indicated by a decrease in assets and an increase in liabilities (including equity), while applications are indicated by an increase in assets and a decrease in liabilities (including equity).
C) Sources and applications are only determined by changes in cash and cash equivalents.
D) Sources include only long-term liabilities and applications include only fixed assets acquisitions.

Q.17 Which of the following is TRUE regarding adjustments required while preparing a funds flow statement?
A) Depreciation charge is ignored as it is a non-cash item and does not affect sources or uses of funds.
B) Sale proceeds from fixed assets should be treated as an application of funds.
C) Even if fixed assets figures remain unchanged between two balance sheets, depreciation and new acquisitions during the year must be considered to correctly identify sources and uses of funds.
D) Dividend payments are not included as a use of funds since they reduce retained earnings directly.