In a vertical common size balance sheet analysis, each balance sheet
item is presented as a percentage of total assets.
Financial Reporting And Analysis MCQ - Financial Reporting And Analysis Section 1
The sale of equipment would increase cash from investing activities.
Issuance of corporate bonds is a financing activity. Since the company
manufactures and sells computers, option C represents an operating
activity.
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A company recorded the following events in 2012:
| Purchase of securities for trading purposes | $250,000 |
| Proceeds from the sale of trading securities | $300,000 |
| Proceeds from issuance of bonds | $500,000 |
| Purchase of 30% of the shares of an affiliated company | $375,000 |
On the 2012 statement of cash flows, the company’s net cash flow from
investing activities (in USD‘000s) is closest to:
investing activities (in USD‘000s) is closest to:
Only the cash flows for the purchase of the shares in an affiliated
company are cash from investing activities. Therefore, the net amount is
-$375,000. Cash flows from trading securities are operating activities.
The company received the cash in 2012 when it recorded the unearned
revenue and it was a part of the cash from operations in that year.
Hence, there will be an increase in cash flow from operations. In 2013,
the revenue is earned, but there is no cash exchanged, and hence no
effect of the cash from operations, ignoring taxes.
