Question

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Operating Activity Investing Activity Financing Activity A company records a loss of $70,000 on the sale of its outdated inventory D and W Co. sells its last season's inventory to a discount store. Digiink Printing co. buys new machinery to ramp up its production capacity. Yum Brands distributes dividends to its common stockholders for the first
During the last year, Globo-Chem Co. generated $1,053.00 million in cash flow from operating activities and had negative cash flow generated from investing activities (-576.00 million). At the end of the first year, Globo-Chem Co. had $180 million in cash on its balance sheet, and the firm had $280 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. $471.25 million
B. $5.189.50 million
C. $282.75 million
D. $-377.00 million

Answer 1

Answer:

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 a. A company records a loss of $70,000 on the sale of its outdated inventory.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

Operating activities have to do with the day to day operations of the business.

b. D and W Co. sells its last season's inventory to a discount store. OPERATING ACTIVITY.

This is also a day-to-day operation of the business so it falls under operating activities.

c. DigiIink Printing co. buys new machinery to ramp up its production capacity.  INVESTING ACTIVITY.

Investing activities have to do with the purchase and sale of capital assets such as financial assets in other companies or fixed assets. The machinery purchased here is a fixed asset so this will count as an investing activity.

d. Yum Brands distributes dividends to its common stockholders for the first. FINANCING ACTIVITY.

Financing activities have to do with the long term debt and equity of a company and this includes dividends so this falls under her.

2. Cashflow due to financing activities:

Cash Balance second year =  Cash Balance first year + Cash Flows From Operating Activities + Cash Flows From Investing Activities + Cash Flows From Financing Activities

280 = 180 + 1,053 - 576 + Financing activities

280 = 657 + Financing activities

Financing cashflow = 280 - 657

= -$377 million