Question

Which statement is most likely to be true of a small business expanding its capacity to...

Which statement is most likely to be true of a small business expanding its capacity to produce?

A. Its cash flow from investment activities is most likely negative.

B. Its cash flow from financing activities is most likely negative.

C. Its cash flow from all activities (operating, investing, and financing) will definitely be positive.

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Answer #1

Correct answer----------A. Its cash flow from investment activities is most likely negative.

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When a business try to expand then new investment opportunities are taken over such purchase of machine, starting new business segment which require cash outflow. This cash outflow is reported on investing section of cash flow providing a negative cash outflow.

Most likely the cash flow from financing section will be positive since cash to be invested is taken from investors or lenders.

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