Question

Correctly answer each part of question #4

"Cash Is King" for all businesses You can determine a company's cash situation by analyzing the cash flow statement. The cash flow statement aso 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 milion? O No O 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 A pharmaceutical company buys marketing rights to sell a drug exclusively in East Asian markets D and W Co. sells its last season's inventory to a discount store. A company records a decrease in its total raw materials inventory from the previous year. Yum Brands distributes dividends to its common stockholders for the first time. O

Answer 1

	Revenue means value of products or services sold.
	The net cash received will be cash collected from sales and other activities less the cash disbursement
	Thus the $100 million revenue doenot mean $100 million in cash.
	Hence the answer is No.
	Buying marketing rights will be investment activity as intagible assets has been bought.
	Selling inventory to discount store is normal operating activities and hence
	it will be part of cash flow from operating activities.
	Decrease in inventory is due to its sales, therefore it is operating activity.
	Dividends are paid to its shareholders therefore it is financing activities.
	Maximum amount of cash will be sales less increase in account receivables assuming no other cash disbursement.
	Maximum amount of cash	=Sales - Increase in Account Receivables
		=$200 - $29
		$171.00	million
	Hence the maximum amount of cash will be	$171.00	million
	Thus the third option is correct.