Question

"Cash Is King" for all businesses 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? O No Yes 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 D and W Co. sells its last season's inventory to a discount store. Digiink Printing Co. buys new machinery to ramp up its production capacity. A company reports a 10% increase in its accounts payable from the last month. Yum Co. uses cash to repurchase 10% of its common stock. During the last year, Galaxy Sun Corp. generated $1,170.00 million in cash flow from operating activities and had negative cash flow generated from Investing activities (640.00 million). At the end of the first year, Galaxy Sun Corp. had $200 million in cash on its balance sheet, and the firm had $355 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?

Answer 1

No, as all revenues might not be received in the same period

Operating activities represent cash flows from the normal business operations of the company

Investing Activities relate to buying and selling of fixed assets

Financing activities relate to raising and repayment of debt and equity

Operating Activity, as inventory is a normal item

Investing Activity, machinery is a fixed asset

Operating Activity

Financing Activity, stock repurchased

Change in Cash during the year = Cash from operating activities + cash from investing activities + cash from financing activities

155 million = 1170 million – 640 million + cash from financing

Cash from financing activities = -$375 million