Question

Which of the following factors could explain why Regal Industrial Fixtures had a negative net cash flow provided (used) by operations year, even though the cash on its balance sheet increased?
a. The company repurchased 20% of its common stock.
b. The company sold a new issue of bonds.
c. The company made a large investment in new plant and equipment.
d. The company paid a large dividend.e.The company had high amortization expenses.

Answer 1

Answer:

The answer is B.

Explanation:

Option B is correct. When a bond is issued, money comes in and this is under Financing section in the cash flow BUT when an already issued bond is sold, cash goes out from the business and this will be in the operating activities under cash flow.

Option A. is incorrect because this will be under Financing activities in cash flow.

Option C. is incorrect because this will be under investing activities in cash flow.

Option A. is incorrect because this will be under investing activities in cash flow.

Option D is incorrect, this is under the operating activities in cash flow but instead of reducing, it will be added back to the net income.