Reference no: EM132613350

Cash flows"Cash Is King" for all businesses

You can determine a company's cash situation by analyzing the cash flow statement. The cash flow statement also helps determine whether the company (1) is generating enough cash from its operations to make new investments and pay dividends or (2) will need to generate cash by issuing new debt or selling its assets.

Which of the following is true for the statement of cash flows?

a) It reflects revenues when earned.

b) It reflects cash generated and used during the reporting period.

During the last year, Lucky Corp. generated $1,170 million in cash flow from operating activities and had negative cash flow generated from investing activities (-$640 million). At the end of the first year, Lucky Corp. had $200 million in cash on its balance sheet, and the firm had $330 million in cash at the end of the second year. What was the firm's cash flow (CF) due to financing activities in the second year?

a) -$200.00 million

b) -$400.00 million

c) $500.00 million

d) $300.00 million

Three categories of activities (operating, investing, and financing) generate or use the cash flow in a company. In the following table, identify which type of activity is described by each statement.

Operating Activity

Investing Activity

Financing Activity

Statement 1. A company records a loss of $70,000 on the sale of its outdated inventory.

Statement 2. Yum Brands distributes dividends to its common stockholders for the first time.

Statement 3. Ruth Enterprises distributes a holiday bonus to all its employees.

Statement 4. A company buys some common stock in its supplier's firm with its extra cash.