ThisIsMyCo Inc. has been your business for the past several years. You have put together your cash flow statements for the past 3 years to get a better idea of how your business is managing cash flow.

Year ending December 31, 2021, 2020 2019 

Cash flow from operations 31,000 32,000 30,000 

Cash flow from investing -4,000 -3,000 -5,000 

Cash flow from financing -20,000 -18,000 -15,000 

Net change in cash 7,000 11,000 10,000 

Cash, beginning of year 66,000 55,000 45,000 

Cash, end of year 73,000 66,000 55,000 

Profit for the year 35,000 34,000 32,000 

The next five questions relate to the cash flow statements below. The rest of the questions in this section of the exam are independent.

Which section of the cash flow statement is considered the most important? Why?

options: 

a) investing because it shows how much the company has spent on long-lived assets 

 b) the change in cash, because it shows the year-over-year difference 

 c) financing because it shows how much the company has borrowed 

 d) operating, because it is the only sustainable source of cash 

 e) All are considered equally important. 

Which life-cycle stage was the business most likely in, back in 2019?

 options: 

a) growth 

 b) maturity 

 c) decline 

 d) either growth or start-up 

 e) start-up 

Which life-cycle stage is the business most likely in by 2021?

options: 

a) either maturity or growth 

 b) growth 

 c) maturity 

 d) decline 

 e) start-up 

Question 

Cash flow from investing activities has been fairly steady, and slightly negative, throughout this period. Which of the following transactions can cause investing cash flow to be negative?

options:

a) lower depreciation expense 

 b) disposal of long-lived assets 

 c) receiving contributions from owners 

 d) purchasing or replacing long-lived assets 

 e) borrowing from the bank 

 f) lower dividends 

Answer rating: 100% (QA)

Solution Which section of the cash flow statement is considered the most important Why Reason The on... View the full answer