Practice question

Consider the following statements regarding financial statements: Statement 1: The Cash Flow Statement provides a detailed breakdown of how a bank manages its liquidity by showing the net movement in cash from its core lending and borrowing activities as operating activities, while interest and dividends received on its proprietary investment portfolio are also classified as operating inflows. Statement 2: In the Fund Flow Statement, the term 'Funds from Operations' represents the actual cash generated by the business during the period and is calculated by adding back all current liabilities and subtracting all current assets from the net profit after tax. Statement 3: When a company acquires a long-term investment by paying through a bank draft, this transaction results in a decrease in the funds of the organization as it involves a movement between a current asset account and a non-current asset account. Statement 4: As per Ind AS 7 guidelines, cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes, and they must be readily convertible to a known amount of cash with an insignificant risk of changes in value. Statement 5: A net increase in the working capital during the year is shown as a Source of Funds in the Fund Flow Statement because it indicates that the company has effectively managed to increase its short-term resources. Statement 6: For a financial institution, cash flows arising from transactions such as cash receipts and payments on behalf of customers may be reported on a net basis when the cash flows reflect the activities of the customer rather than those of the institution. Statement 7: The payment of a contingent liability that was previously only disclosed in the footnotes but has now materialized and been paid in cash will be recorded as an operating cash outflow in the cash flow statement. Which of the following describes the correct status of these statements?