You are studying with some classmates, when one of them makes the following statement:

“If a company reports a net loss on its statement of income, then we know the following:

• Expenses exceeded revenues for the period.
• Retained earnings will be reduced by the amount of the loss.
• Cash flows from operating activities will be negative.
• And finally, the company’s cash flows from financing activities will have to be positive or else the company would have had to cease operations.”

Required

Evaluate your classmate’s statement. Identify the elements that are correct and incorrect. For any elements that are incorrect, explain why.