Question

Upon review of Make Your Mark, Inc.'s Statement of Cash Flows, the following was noted: Cash Flows from Operating Activities $15,000 Cash Flows from Investing Activities ($80,000) Cash Flows from Financing Activities $60,000 From this information, the most likely explanation is that Make Your Mark is O A using cash from operations to repay long term debt and purchase long term assets. OB, using cash from operations and issuing common stock to purchase long term assets. OC, assuming long term debt to fund operations and purchase long term assets. OD. selling long term assets to fund operations and pay dividends to shareholders. O E issuing common stock to fund operations and purchase long term assets.

Answer 1

The implications which can be noted are as follows:

1. Cash flow from operations means the profit/loss from the business. A cash inflow implies a cash inflow from operations while a cash outflow signifies a loss.

Here, $15,000(being Profit) signifies a cash inflow from operations.

2. Cash flows from investing activities means the sale or purchase of long term assets/investments pf the company. A sale result in cash inflow while a purchase result in cash outflow,

Here, ($80000) denotes that there is a purchase of a long-term asset.

3. Cash flow from investing activities denotes issue/repayment of bonds or shares or long term liabilities. It also includes payment of interest or dividend. Issue of bonds/Shares or Loans taken show a cash inflow. While Repayment of bonds/loans or buyback of shares or payment of interest or dividend shows a cash outflow.

Here,$60,000 shows that common stock is issued during the year.

In the given case As per the analysis of given information & implications above.

The correct answer is Option (B): using cash from operations and issuing common stock to purchase long term assets.