Question

Shyam is running a start-up. His initial investments are high and he is trying hard to manage and increase his cash flow. The sundry expenses that his firm incurs is negligible. He found from his accountant that the amount of pre-paid expenses in the balance sheet, which were booked from the previous year to the current year was increased. Shyam also ensured that his cash funded by the venture capitalists did not reduce when compared to the previous year. The interest that he gets from his fixed deposits increases, which is in tune with his sundry expenses. The final effect on cash for this year would be ____________.

• A. Cash flow marginally increases
• B. Cash flow exponentially increases
• C. Cash flow remains the same
• D. None of the above

Hint:

List which clues push cash in and which push cash out, then check whether the question gives enough numbers to compare the size of those pushes.

Answer 1

The Correct Option is D

Step 1: Read what each clue does to cash, one at a time.
Prepaid expenses in the balance sheet went up. Paying for something in advance is a cash outflow, so by itself this pulls cash down, but we are never told by how much.

Step 2: Check the venture capital clue.
Cash funded by venture capitalists did not reduce compared to last year. That only tells us this cash source held steady, it does not add anything new and it does not take anything away.

Step 3: Check the interest clue.
Interest from fixed deposits went up, and the question links this rise loosely to the sundry expenses, which are called negligible. Since we have no actual rupee figures for either the prepaid expense rise or the interest rise, we cannot say which change is bigger.

Step 4: Try to net everything out.
One factor pushes cash down, one factor pushes cash up, one factor is flat, and real cash flow also depends on sales and operating spend, which this question never mentions at all. With no numbers and no full picture, we cannot honestly pick a rise, a big rise, or a flat outcome.

Final Answer:
Since the actual direction and size of the change cannot be pinned down from the given facts, none of the three specific outcomes can be justified. \[ \boxed{\text{None of the above}} \]