HBX-Accounting 5 Molly Emerson Flashcards (2023)

OPERATING Categories: Statement of Cash Flows.

Funds received from clients and paid to suppliers:

Interest Paid (Or Financing Section for IFRS)
Interest received (Or investment section for IFRS)
Dividends received (Or investment section for IFRS)
Money paid to a supplier for inventory
Money received in advance for services
Cash receipts from sales in the current period
Cash commissions for selling Precious Period Credits
cash received in advance for sales in future periods
Money paid to buy the trades of the current period
Money paid for credit purchases in prior periods
Money paid in advance for future purchases
money paid for interest
warehouse sale

INVESTMENT Categories: Statement of Cash Flows.

Payment of P, P and E (property and equipment
Money paid for long-term investments
Gains on loans to third parties
Proceeds from sales of equity investments
Acquisition of shares
Made money selling equipment
Proceeds from the Sale of Debt Securities

FINANCIAL CATEGORIES: Statement of Cash Flows.

Dividends paid to shareholders (Or operating section for IFRS)
Money from a bank loan
Money spent to repay a loan
Money paid to shareholders
capital inflow
Share Repurchase
Long term deposit payment
Proceeds/cash received from the issue of Shares
Proceeds from the bond issue
Share repurchase payments
Principal paid on notes payable
loan money
Repurchase of common shares

Changes found on an income statement/balance sheet then change to the net income figure for the cash flow statement

Depreciation and amortization (part of business)GESTURE OF DISAPPROVAL: add the $$!
Team win/loss(Department of Operations / Investments) GESTURE OF DISAPPROVAL: These are included in the INVESTMENTS section, but on the income statement, this $ is included in net income.
So if we WIN $, we subtract from the net profit and if we LOSE $, we add the net profit.
receive bills(part of business)GESTURE OF DISAPPROVAL:If this # is positive, SUBTRACT THIS # from net income (actually, we haven't gotten this $$ yet)
Increase in inventory/asset count(Operations/Investments Section)GESTURE OF DISAPPROVAL: SUBTRACT THIS # from net income for the cash flow statement since WE use cash to pay for inventory
reductionin the stock/asset accountGESTURE OF DISAPPROVAL: ADD to net income
Increase in short-term operating liabilities GESTURE OF DISAPPROVAL: ADD THIS to net income
reductionin a business checking account GESTURE OF DISAPPROVAL: SUBTRACT THIS from net income

SOURCE OF FUNDS: Proof of source and use of funds - What does it contain?

An increase in debt/equity represents a source of financing
The reduction of assets is a source of financing.

*Cash change will be ignored

*Accounts without bills of exchange will be ignored

*TIP: "Net Change in Cash" and "Cash Balance at Beginning of Year" and "Cash Balance at End of Year" on the source and use statement should match the cash position on the balance sheet.

USE OF THE FUND: Proof of origin and use - What does it include?

A reduction in liabilities or owner's equity represents a use of funds.
An increase in wealth is a use of funds

Cash changes will be ignored.

Accounts without movement during the year are also ignored.

Categorize each change as a source of funds or a use of funds.

A reduction in the owner's liabilities or equity account
An increase in liabilities or equity
A reduction in wealth
An increase in wealth
cash changes
accounts without change

ADecrease in liabilities or equityThe account represents ause of funds.
aIncrease in liabilities or equityasource of income.
Adecline in wealthIt's asource of income.
awealth growthIt's ause of funds.
changesthey are in cashignored
accounts without changealso in the yearignored

What are the 3 main grades?

Three main grades:

balance sheet
admission Test
Cash Flow

Purpose of the cash flow statement? And from what sources was it created?

The purpose of cash flow is to provide a more detailed picture of what happened to a company's cash during an accounting period. It shows the different areas where the company has used or received cash and reconciles the beginning and ending balances.

Fonts used to create:

Balance at the beginning and end of the period
The income statement for the period
some transaction data

With accrual accounting, income and expenses are not necessarily recognized when the money is received. A business reporting $10,000 in net income may not have added $10,000 to its cash position. Some of this income may be in the form of accounts receivable or may have been used to purchase assets or repay loans.

*A teller has positive net income while generating negative cash flows over a period of time. Cash flows are important in evaluating the business and managing liquidity.

What are the 3 sections of the US statement of cash flows?

How does the following transaction affect the cash flow?

Purchase of shares on credit

No Impact: No money is exchanged at the time of this transaction.

How does the following transaction affect the cash flow?

Dividends decided by the Board of Directors

The correct answer is no effect.

Declared dividends do not mean that they have been paid. When dividends are declared, they are generally accounted for as dividends payable and paid at a later date.

How does the following transaction affect the cash flow?

Receive money for goods or services that have not yet been provided

Positive. Although revenue is not recognized until the goods or services are provided, cash is received at the time of that transaction.

How does the following transaction affect the cash flow?

Property insurance cash payment for the next 2 years

The correct answer is: negative (decrease)

Although the expense is not recognized until the prepaid insurance is amortized, the cash is paid at the time of that transaction.

quince

Operating Section (for Cash Flow Statement) Defined.
And what are the two methods of preparing this section?

The Operations section contains information about cash used or received in the preparation and delivery of goods or services to customers. Most asset and liability checking accounts are associated with cash flows that are part of operations. This section contains information about operating decisions that management is obscuring and is typically the most frequently used section of the statement of cash flows. This section is closely related to net income. Essentially, it shows what the net income would be using the cash method of accounting. It does this by eliminating those parts of the income statement that do not affect the cash account and those that are not related to the operations of the business.
Two methods to prepare this section:

direct method
indirect method
Both result in the same number: the net cash flow from operating activities.
Under IFRS, a company can choose its own policy in which section it includes the interest paid. In some cases you will find it in the operations part, otherwise in the financing part.
In accordance with US GAAP, dividends paid are not reported in the operating section, but rather in the financial section.

sixteen

What are some of the key differences between the statement of cash flows prepared under US GAAP and IFRS?

US-GAAP |IFRS

interested payment-Operational Section🇧🇷 Operational Section Or Financing
dividends paid-financing section🇧🇷 Operational Section Or Financing
interest income-Operational Section🇧🇷 Area of operation or investment
dividends received-Operational Section🇧🇷 Area of operation or investment

International standards allow much more flexibility in the classification of interest and dividends, but require that the treatment be consistent from period to period.

Which of the following activities is considered an operating activity under US GAAP?

Money from a bank loan
Money paid to a supplier for inventory
Money spent to repay a loan

Money paid to a supplier for inventory

That's the correct answer! Inventory is an integral part of a company's operations, and the cash spent to pay for inventory has an impact on operating cash flow.

Which of the following activities is considered an operating activity under US GAAP?

Payment of PP&E that the company bought a month ago
Money received in advance for services
Proceeds from stock issue

Money received in advance for services

Money received from clients, even if received in advance, is an operating activity.

DIRECT METHOD (Operating Section of the Cash Flow Statement) EXPLAINED

Take out all cash inflows from operations and subtract all cash outflows from operations.
This method uses information from transactions that affected cash during the period. Once all the cash flows from operating activities have been identified, creating this section only requires that we list those activities and their respective amounts.
“Money received from customers”: represents money received from customers, not necessarily actual sales during that period. ((The amount of cash charges may be less because they collected $ from customers in other ways. It may also be more because they may have collected cash from sales made in a prior period.))
# Positives result in a cash inflow for the period
Negative numbers in parentheses represent cash outflows.
Cash paid is not the expense recognized in the period but rather the amount of cash paid to another party.
It's not required, but companies often list inputs before outputs.

What category is "money paid to buy equipment"?

Invest

What are the cash flow categories?

Proceeds from the sale of fixed assets
Interest and dividends received
money paid for interest
Cash dividends paid to shareholders
Interest Received in Cash

Proceeds from the sale of fixed assets - investments
Interest and Dividends Received - Operational
Money paid for interest - operating
Cash dividends paid to shareholders - Financing
Interest Received in Cash - Operational

INDIRECT METHOD (operating part of the cash flow statement) EXPLAINED

Using the indirect method, we start using net income from the income statement and make adjustments to reverse the effect of additions made during the period.
Essentially converting net income into actual cash flows through the breakdown.

An easy start isIdentify all non-cash expenses for the period on the income statement.The most common/persistent are

Depreciation and amortization. 🇧🇷Amortization is like amortization of intangible assets) We record amortization at cost atlong lifeAn asset that contains the income you have helped generate over time. But companies do not pay extra money because the effort is recognized. the cash outflowIt occurredwhether the asset was originally purchased.

Additional things you need to do in the indirect method.... 🇧🇷Use the swing!)

to receive invoices.Technically, we haven't received that income yet (although it's on the balance sheet), so we're going to deduct it from the statement of cash flows.- We still don't have the $$!When the demands go down, we get the money! We can add this to the operations section.in cash flows! Think of it as revenue recorded duringlastperiod, but the $ collected was FROM THIS period.
The same adjustment must be made for all other working capital accounts.
Example: Adjusting for inventory fluctuations would affect Apple's cash flow statement. At the end of September 2012, Apple had 791 inventory items on its balance sheet.Milin September 2013 Apple had 1,764Mil.
That means Apple's inventory increased by 973 million during that period. The increase represents a paid cash outflow for inventories and does not appear as an expense on the income statement.
In the operating portion of Apple's statement of cash flows, inventoriesesappears as a decrease of $973 million.

In principle, the preparation of the statement of cash flows as part of the operating activity using the indirect method is an expropriation.

As a summary, the general rules for accounting for asset provisions when using the indirect method:

If an asset count increases,it must be that the entity has acquired an additional asset. The acquisition of assets generally requires a cash payment, so the general conclusion is that if an asset account increased (for example, inventory was purchased or more sales were made), the cash account decreased.
If an asset account decreases, it must be that the entity has sold or disposed of an asset. The sale of assets is usually accompanied by a cash payment. Therefore, the general conclusion is that when an asset account has decreased (for example, inventories have been sold or accounts receivable debited), the cash account has increased.

$10,000 raise

That's the correct answer! The net income adjustment is an increase of $10,000 because $10,000 of depreciation expense was recorded during the year. By adding this amount back to net income, we remove the impact of this non-cash transaction.

$22,000 raise

That's the correct answer! The net income adjustment is an increase of $22,000 because $22,000 in depreciation and amortization expense was recorded during the year. By adding this amount back to net income, we remove the impact of this non-cash transaction.

In which section of the statement of cash flows should the cash from the sale of a truck be included?

Invest.

$1,000 off

All cash flow from the sale of fixed assets is an investing activity and not an operating activity. The benefit itself is a non-monetary item. To eliminate this gain, the amount of $1,000 must be deducted from net income in the operating section of the statement of cash flows. Since earnings would have increased net income, this subtraction ensures that the net impact on cash flow from operations is zero.

$12,000 raise

All cash flow from the sale of fixed assets is an investing activity and not an operating activity. The loss itself is a non-cash item. To eliminate this loss, the amount of $12,000 must be added to net income in the operating portion of the statement of cash flows. Since the loss would have reduced net income, this addition ensures that the net impact on cash flow from operations is zero.

What does it look like on a cash flow statement if Apple's inventory increases by 973 million?

Summarize the general rules for accounting for asset provisions when using the indirect method... What happens and when

a credit increases
a credit score decreases
increases responsibility
a liability decreases

When an equity account increases,it must be that the entity has acquired an additional asset. Purchasing assets typically requires a cash payment, so the general conclusion is that as an asset account grows (for example, inventory was purchased or more sales were made in the account),then the cash account decreased.
If an asset account decreases, it must be that the entity has sold or disposed of an asset. The sale of assets is usually accompanied by a cash payment. Therefore, the general conclusion is that when an asset account has decreased (for example, inventories have been sold or accounts receivable have been debited),then the cash account increased.
When a liability increases (for example, accounts payable)during the period indicates that a benefit was received, such as B. an inventory receipt before the actual money has been paid. adjust to itWe add this increase to the profit for the year🇧🇷 Think of it as if we are spending less money than we are incurring in related expenses, so we are saving money.
When a liability decreases, means that we pay cash to reduce the previously incurred liability so that we spend less than we pay, andWe deduct the difference from the net profit🇧🇷 Think of it as spending more money than we incur in the associated costs. The same rule applies to all operating liability accounts.

The correct answer is a $104,205 decrease in accounts receivable and a $92,348 increase in inventory.

As trade receivables increased during the year, this means that cash received was less than reported income and therefore the adjustment is expected to reflect a decrease related to trade receivables. If inventory decreased, it means the recorded COGS cost was greater than the money spent purchasing inventory, so the adjustment should reflect an inventory-related increase.

The correct answer is a $973 decrease in inventory and a $1,071 decrease in other current assets.

Because inventory has increased, this means that the money paid to purchase the inventory was greater than the accepted COGS cost, so the adjustment is intended to capture a corresponding decrease in inventory. As other current assets increased, this means that the cash paid to acquire these assets was greater than the expenses incurred during the period and therefore the adjustment is intended to reflect a decrease relative to other current assets.

$87 increase in accounts receivable and $172 increase in inventory

If trade receivables decreased, it means cash collected was higher than reported revenue, therefore the adjustment is intended to record an increase related to trade receivables. Since inventory has decreased, this means that the COGS cost has been greater than the money spent purchasing inventory, so the adjustment is expected to show an increase related to inventory.

What are some simple rules you can keep on hand to help you remember how to convert net income to cash flow from operations using the indirect method?

An increase in working capital is ____ of net income.
A decrease in working capital is ____ of net income.
An increase in current operating liabilities is ____ to net income.
A decrease in short-term operating liabilities is ____ of net income.
***IFRS ONLY - Under IFRS, the trader has the option to include interest in the "Operating OR Financing" section. In the indirect method, if the preparer chooses not to include interest in the operating part, an adjustment must be made to ____ since it is included in profit or loss.

An increase in working capital isdeductednet profit.
A decrease in working capital isadditionalto net profit.
An increase in current operating liabilities isadditionalto net profit.
A reduction in current liabilities isdeductednet profit.
***IFRS ONLY - Under IFRS, the trader has the option to include interest in the "Operating OR Financing" section. In the indirect method, if the preparer chooses not to include interest in the business portion, an adjustment must be mademoversince it is included in the result of the period.

Increase of $32,593 for accounts payable and increase of $70,977 for accrued expenses

If trade payables and accrued expenses increased, this means that cash paid was less than recognized expenses, so the adjustment is intended to recognize an increase in both trade payables and accrued expenses.

$1,192 increase in accounts payable and $2,442 increase in accrued expenses

Increase of $259 for accounts payable and increase of $491 for other current liabilities

As trade payables and other current liabilities increased, this means that cash paid was less than recognized expenses, so the adjustment reflects an increase in both trade payables and other current liabilities payables. short term.

$491 reduction for accounts payable and $852 reduction for accrued expenses

If trade payables and accrued expenses decreased, this means that cash paid was greater than recognized expenses and the adjustment is intended to reflect a decrease in both trade payables and accrued expenses.

Define the objective of the investment section.

The Investments section of the Cash Flow Statement includes cash flows related to long-lived assets such as property, plant and equipment, intangible assets, and financial investments. Includes expenses or cash outflows related to the purchase of assets and long-term income or cash inflows from the sale of non-current assets.For the F.C. Barcelona, this could include money spent on building stadiums, renovating changing rooms and improving pedestrian and car access to stadiums. It also includes the aforementioned fixed payments for player acquisition. If a property, building or even players are sold to other companies, the cash proceeds from these transactions are also reflected in the Investments section.

The presentation of this section is simple:

We first list the money paid to buy long-lived assets.
We then list any cash received from the sale or disposal of long-lived assets. Remember that negative numbers (in parentheses) represent outflows and positive numbers represent inflows.

Additional inflows and outflows that would be included in this section relate to loans made to another entity, known as loan receivables, and certain fixed asset values.

Most companies use the indirect or direct method for the operating portion of the cash flow statement????

*Most businesses around the world use the indirect method (because otherwise you must provide ANOTHER statement showing how you earn your $$ net income)

* The indirect method is simpler since it comes from initial declarations; the direct method uses transactional data.

In which section should these items be in the statement of cash flows?

dividend payment
Raising equity from an owner
Payments received from loan receivables
share repurchase
Sales proceeds for capital investments
Payment of long-term bonds payable
Dividends paid to shareholders
Proceeds from the issuance of Shares
loans to third parties

Payment of dividends - financing
Equity entry from an owner - financing
Payments received from loan claims - investment
Repurchase of shares - Financing
Proceeds from sales of equity investments - Investir
Payment of long-term securities liabilities - financing
Dividends paid to shareholders - financing
Proceeds from the issuance of Shares - Financing
Loans to third parties - Invest

Suppose company X sold a device during the year. The equipment was purchased five years ago for $10,000. $5,000 depreciation was taken on the equipment at the time of sale. Company X received $6,000 from the sale of the equipment.

How would the sale affect the statement of cash flows prepared using the indirect method?

$6,000 would show as an increase in funds in the investing section and the $1,000 gain would show as a decrease in the trading section

The $6,000 received by the team should be an increase in the investing section, and since the $1,000 gain is a non-cash item that would have been included in net income, it should be deducted in the operating section.

Suppose that on March 1, 2013, Company X purchased 10,000 shares of common stock at a price of $15 per share. On November 30, the Company received a cash dividend of $10,000 on the shares purchased.

Under US GAAP, how would this investment and dividend affect the 2013 statement of cash flows using the direct method?

The $150,000 would show up as a decrease in funds in the investing space, but the $10,000 would show up as an increase in the trading space.

The $150,000 paid to purchase common shares should be reduced in the "Investments" section and, under US GAAP, the $10,000 of cash dividends received should be included in the "Operations" section.

Let's say Green Mountain Coffee Roasters (GMCR) sold $30 million in land during the year. GMCR also acquired a long-term investment in a small competitor for $10 million, and at the end of the year, GMCR purchased computers for $1 million to replace its current equipment.

What would be the net impact of these transactions on the investment section of the statement of cash flows?

$19 million net increase in cash from investing activities

All transactions are part of the investment section of the GMCR. As a result, the section will have a positive cash flow effect of $19 million (a total of $30 million in, $10 million out, and $1 million out).

Suppose Company Z loaned Company A $100,000 on January 1, 2012. On December 31, 2013, Company A paid $100,000 and also paid $12,000 in interest to Company Z.

What would be the US GAAP impact of the transaction on Company Z's 2013 statement of cash flows using the direct method?

The $100,000 would show as an increase in funds in the Investments area, but the $12,000 would show as an increase in the Operations area

The $100,000 received must represent an increase in the investment section and under US GAAP the $12,000 of interest received must be included in the operations section.

Define the purpose of the financing section

This includes the cash flows associated with obtaining and returning funds to investors and creditors.When a business takes out a new loan or pays off an existing one, this is reflected in this section. If a business receives contributions from owners, it will also appear in this section. Dividends paid are included in this section under US GAAP, but as noted, dividends paid under IFRS may be included in the operating section and not the financing section. Additionally, while interest paid is reported in the business section under US GAAP, under IFRS it is sometimes reported here.

Name this category Cash Flow Statement

Proceed with the issuance of securities
Cash received from stock issue
money paid for interest
Capital received from loans to others
Acquisition of shares
Payments for inventory on sight
Capital paid in bills of exchange

Proceed with the issuance of securities - financing
Money received from the issuance of shares - financing
Money paid for interest - operating
Capital received from loans to third parties - investment
Acquisition of equity investments - Investir
Payments to Require Inventory - Financing
Principal paid in promissory notes - financing

debt increase

Debt withdrawal: In exchange for borrowing money, individuals or institutions become creditors and receive the promise that the principal and interest on the debt will be paid. The other way to raise capital in the debt capital markets is to issue shares in a public offering; this is called equity financing. (Google definition - not sure if we really need to know)

Sources and Uses of Funds: Define the purpose and explain how you create it.

Another way for a business to keep track of its cash is to create an inventory of the sources and uses of funds. They're casual, easy to do, and keep things organized!
They avoid distinguishing the three parts of the statement of cash flows and also skip many steps in the process of expropriation of the operating parts.

Preparation of a list of the origin and destination of the funds.

Make 2 swings. One from the beginning of the period and one from the end.
Find the difference
Categorize each change as a source of funds or a use of funds.
- A reduction in liabilities or owner's equity represents a use of funds.
- An increase in these accounts represents a source of financing.
- A reduction in assets is a source of financing.
- An increase in wealth is a use of funds.
- Cash changes will be ignored.
- Accounts without movement during the year are also ignored.

TIP: The “Net Change in Cash” and “Cash Balance at Beginning of Year” and “Cash Balance at End of Year” on the Source and Use Statement should match the cash position on the balance sheet.

What information can we get from the cash flow statement?

How the Red Cross uses information:

Analyze your financing and investment activities to understand: are we investing the capital appropriately? As you can see, do our assets depreciate at the same level as they are reinvested in the organization?
To ensure that they are properly managing their working capital. That they are aligned with your inventory investment cycle and that your assets and liabilities are aligned. (You do not want to use donor dollars for additional working capital)
Cash flow requirements for your long-term debt. (pension fund, insurance organization)

What does a cash flow statement for a startup look like?

Operational:This often leads tonegative or very low cash flowsOperations This is especially true when a company takes longer to raise money from sales than it does to pay its suppliers. In this situation, even if the company has positive gross profit and positive net income, it may still have negative cash flows from operations. Some companies spend years in this phase before realizing positive cash flows from operations.
Invest:The investment area is alsoprobably negativefor a start up. These businesses will buy equipment and buildings, and since they are just getting started, they often do not have equipment to dispose of to generate cash flow.
financing: The financial sector may havelarge fluctuationsfor a start up. When a company has negative cash flow from operations and investments, it needs a source of cash to finance those two activities as it grows and becomes more profitable. The money comes from the finance department. However, a company in the start-up phase often has difficulty obtaining funds from a bank, as a start-up is associated with a high level of risk. Much of the funding is likely to come from equity investments, either from the founders or from outside investors. In some cases, a business may not need to raise money every year; You could raise a lot of money in a year, and then use it to buy equipment and assets over various periods of time.

When examining the statement of cash flows for a new business, which of the following are common?

A negative cash flow from operating activities.
A positive cash flow from investing activities.
A negative cash flow from financing activities

A negative cash flow from operating activities.

Typically, a startup has negative cash flow from operations because it buys inventory and supplies, and it can take longer to get money from customers than it does to pay its suppliers.

When examining the statement of cash flows for a new business, which of the following are common?

A positive cash flow from operating activities
A negative cash flow from investing activities.
A negative cash flow from financing activities

A negative cash flow from investing activities.

A startup is likely to have negative cash flow from investing activities, as the company will buy equipment and buildings as it is just getting started.

Profitable/Growth Phase - Interpretation of the Cash Flow Statement.

At this point, the company is past the start-up phase and has become profitable, but is still trying to grow and expand.

Operational:Cash generated from operationsbe generally positive🇧🇷 These companies generate high enough cash inflows to cover regular operating cash outflows and are growing slowly enough that internally generated cash supports growth.
Invest:Continued growth requires the acquisition of machines and systems. So invest cash flowsis usually negativefor growing businesses, because more is spent on buying new equipment than is earned on disposing of old equipment.
Financing:finance cash flowscan be slightly positive or negativedepending on how fast the business is growing and how much cash flow is generated from operations. When cash flows from operations are sufficient to pay for new equipment purchases and other investing activities, financing cash flows can be negative as the company uses the excess cash flow to repay loans. If a company is growing faster than it can finance from operating cash flow, it will have positive cash flow from financing activities because it is receiving more money from investors and creditors. Cash flows from financing can also be neutral or close to zero because the company makes enough money from operations to cover capital expenditures, but not enough to start paying dividends.

Which of the following statements are commonly found when examining the cash flow statement of a profitable/growing company?

A positive cash flow from operating activities
A neutral cash flow from investing activities
Clearly positive cash flow from financing activities

A positive cash flow from operating activities

A profitable/growing business will generally have positive cash flow from operations, as these businesses generate enough revenue to cover regular operating expenses.

Which of the following statements are commonly found when examining the cash flow statement of a profitable/growing company?

A negative cash flow from operating activities.
A positive cash flow from investing activities.
A positive or negative cash flow from financing activities

A positive or negative cash flow from financing activities

A profitable/growing business is very likely to have positive or negative cash flow from financing activities, depending on how fast the business is growing.

Define and describe a cash flow statement for a mature/stationary phase

A mature company is one that is well established in its field and is no longer experiencing rapid growth. These include companies like Apple or F.C. Barcelona.

Operational:The operating cash flow will bebe generally positivefor these stores. They will have a steady and steady stream of cash from winnings and will generally be one of the best players in their market.
Invest:Since they are not intended to grow or expand rapidly, cash flow from investing activities will generally beslightly negativeas newly purchased equipment replaces worn-out equipment.
Financing:Although it can fluctuate, cash flow from financing activitiesis usually negativefor mature companies. This is because they generate enough cash from their operations to support their investment needs. Because the excess cash generated is not needed to finance growth, the cash can be used to pay off loans or return cash to shareholders through dividends.

Which of the following statements are commonly found when examining the cash flow statement of a profitable/growing company?

A positive cash flow from operating activities
A neutral cash flow from investing activities
Clearly positive cash flow from financing activities

A positive cash flow from operating activities

A profitable/growing business will generally have positive cash flow from operations, as these businesses generate enough revenue to cover regular operating expenses.

Sixty-five

Which of the following statements are commonly found when examining the cash flow statement of a profitable/growing company?

A negative cash flow from operating activities.
A positive cash flow from investing activities.
A positive or negative cash flow from financing activities

A positive or negative cash flow from financing activities

A profitable/growing business is very likely to have positive or negative cash flow from financing activities, depending on how fast the business is growing.

Define and describe the cash flow statement of a company in REJECT.

A declining business becomes less profitable due to competition, higher material costs, or other reasons. I could probably go bankrupt.

Operational:The operating cash flow will beis usually negativeas business conditions have deteriorated and the company has failed to adapt to a changing environment.
Invest:The cash flow from investing activities for a company in decline isprobably positive🇧🇷 Fewer customers and less revenue means less work to do, which in turn means less investment in new equipment. The company can also sell existing assets that are not being used, thereby generating positive cash from investing activities.
Financing:financial cash flowIt can be positive or negative.These businesses may have difficulty obtaining new credit due to their deteriorating circumstances. On the other hand, they are unlikely to generate excess cash flow to pay off their loans.

When examining the cash flow statement of a declining business, which of the following statements are common?

A negative cash flow from operating activities.
A negative cash flow from investing activities.
Clearly positive cash flow from financing activities

A negative cash flow from operating activities.

A business in decline typically has negative cash flow from operations because business conditions have deteriorated and the business has been unable to adapt to a changing environment.

When examining the cash flow statement of a declining business, which of the following statements are common?

A positive cash flow from operating activities
A positive cash flow from investing activities.
A significant negative cash flow from financing activities

A positive cash flow from investing activities.

A company in decline typically has positive cash flow from investing activities because it does not buy new equipment, but rather discards old equipment.