Three categories of activities (operating, investing, and financing) generate or

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 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 A company records a loss of $70,000 on the sale of its outdated inventory A pharmaceutical company buys marketing rights to sell a drug exclusively in East Asian markets. During the last year, Lucky Corp. generated $702 million in cash flow from operating activities and had negative generated from investing activities (-$384 illion). At the end of the first year, Lucky Corp. 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-$54.00 million O -$108.00 million O $135.00 million O $81.00 million 134.1 0 2004-2016 Aplia All rights reserved Save & C

Explanation / Answer

1.

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

Financing Activity

Fitzi Chemicals Co. earns revenue from its cash receipts from royalties.

Operating Activity

A company records a loss of $ 70,000 on sale of its outdated inventory.

Operating Activity

A pharmaceutical company buys marketing rights to sell a drugs exclusively in East Asian markets.

Investing Activity

  

2.

Cash balance at the end of year first = $ 120 M

Cash balance at the end of year second = $ 330 M

Net change in cash balance = $ 330 - $ 120 = $ 210 M

Net cash from operating activity = $ 702 M

Net cash from investing activity = - $ 384 M

Net change in cash = Cash from operating – Cash from investing + Cash from financing

$ 210 M = $ 702 M - $ 384 M + Cash from financing

$ 210 M = $ 318 M + Cash from financing

Cas from financing activities = $ 210 M - $ 318 M = - $ 108 M

Hence option 2nd “- $ 108 million ” is correct answer.

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

Financing Activity

Fitzi Chemicals Co. earns revenue from its cash receipts from royalties.

Operating Activity

A company records a loss of $ 70,000 on sale of its outdated inventory.

Operating Activity

A pharmaceutical company buys marketing rights to sell a drugs exclusively in East Asian markets.

Investing Activity

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