The correct question is:
Analysts who follow Howe Industries recently noted that, relative to the previous year, the company's net cash provided from operations increased, yet cash as reported on the balance sheet decreased. Which of the following factors could explain this situation?
Select one:
a. The company cut its dividend.
b. The company made large investments in fixed assets.
c. The company sold a division and received cash in return.
d. The company issued new common stock.
e. The company issued new long-term debt.
Answer:
b. The company made large investments in fixed assets.
Explanation:
The operating cash if invested in fixed assets will increase cash flow in the business. Since the cash is not used in production within that period (was invested in long term asset), it will not be represented as cash flow for this period. So reported cash will be low.
Companies invest in long term assets that will produce returns in to future, so cash flow from this investment will appear at a future date.