You can determine a company\'s cash situation by analyzing the cash flow stateme

Question

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 A firm has $100 million in revenues. Does that mean it has generated a cash flow of $100 million? es No 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 Yum Brands distributes dividends to its common stockholders for the first time Fitzi Chemical Co. earns revenue from its cash receipts from royalties. A company records a loss of $70,000 on the sale of its outdated inventory A company buys some common stock in its supplier's firm with its extra cash During the last year, Dual Purposes Products Co. generated $702 million in cash flow from operating activities and had negative cash flow generated from investing activities (-$384 million). At the end of the first year, Dual Purposes Products Co. had $120 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? O -$108.00 million O $81.00 million O -$54.00 million $135.00 million

Explanation / Answer

Part 1

Question

A firm has 100 million in Revenues, Does this mean it has generated a cash flow of 100 million.

Answer--- No

Explanation

Sales on account are also added to revenues of the firm. Hence Revenues includes cash sales as well as credit sales which indicate that it is not necessary that 100 million of revenues mean 100 million of cash flow generation.

Part 2

Type of Activity

Yum brands distributes dividends to its common stock holders for the first time

Financing activity

Fitzi Chemicals co earns revenues from its cash receipts from royalties

Operating Activity

A company records a loss of $70000 on sale of its outdated inventory

Operating Activity

Aa company buys some common stock in its supplier's firm with its extra cash

Inverting Activity

Part 3

Correct Answer -$ 108 million

In millions

Calculation of cash from Financing activities

(A)

Cash from Operating Activities

$   702.00

(B)

Cash used in Investing Activities

$ (384.00)

(C )

Beginning cash balance

$   120.00

D= (A+B+C)

Total Cash

$   438.00

(E)

Actual Ending cash balance

$   330.00

F= (D-E)

Cash used in Financing Activities

$   108.00

                                               

Type of Activity

Yum brands distributes dividends to its common stock holders for the first time

Financing activity

Fitzi Chemicals co earns revenues from its cash receipts from royalties

Operating Activity

A company records a loss of $70000 on sale of its outdated inventory

Operating Activity

Aa company buys some common stock in its supplier's firm with its extra cash

Inverting Activity

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