Practice Test GeeksCCA - Certified Credit Analyst Practice Test
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Cash Flow Analysis Flashcards

7 cards from real CCA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Cash Flow Analysis flashcards as text

  1. Which section of the cash flow statement reflects cash generated from a company's primary business operations?

    Answer: Operating activities

    Operating activities capture cash inflows and outflows directly related to the core business, such as receipts from customers and payments to suppliers.

  2. A company reports net income of $500,000, depreciation of $80,000, and an increase in accounts receivable of $60,000. What is the approximate cash flow from operations using the indirect method?

    Answer: $520,000

    Under the indirect method: $500,000 + $80,000 (add back non-cash depreciation) − $60,000 (increase in AR uses cash) = $520,000.

  3. What does a persistently negative operating cash flow combined with positive net income most likely indicate to a credit analyst?

    Answer: Aggressive revenue recognition or collection problems

    When net income is positive but operating cash flow is consistently negative, it often signals aggressive accrual accounting or deteriorating receivables collection.

  4. Free cash flow (FCF) is best defined as:

    Answer: Operating cash flow minus capital expenditures

    FCF = Operating Cash Flow − Capital Expenditures, representing cash available after maintaining and expanding the asset base.

  5. Which of the following is a non-cash item that is added back to net income when preparing the operating section under the indirect method?

    Answer: Depreciation and amortization

    Depreciation and amortization are non-cash charges that reduce net income but do not involve an actual cash outflow, so they are added back.

  6. A decline in accounts payable would appear on the indirect-method cash flow statement as:

    Answer: A subtraction from net income

    A decline in accounts payable means the company paid suppliers faster, consuming cash, which reduces operating cash flow.

  7. Which cash flow metric is most commonly used by credit analysts to measure a borrower's ability to service debt?

    Answer: Debt Service Coverage Ratio (DSCR)

    DSCR compares operating cash flow (or EBITDA) to total debt service obligations, directly measuring whether a borrower generates sufficient cash to cover principal and interest.