Question

Cash flows from investing activities are determined by: A. Analyzing each item on the income statement....

Cash flows from investing activities are determined by:

A. Analyzing each item on the income statement.

B. All of these.

C. Analyzing the long-term liabilities, short-term borrowings, and stockholder’s equity accounts on the balance sheet.

D. Analyzing long-term asset and short term investment accounts on the balance sheet.

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Answer #1
Cash flows from investing activities are determined by:
ANSWER: D. Analyzing long-term asset and short term investment accounts on the balance sheet.
Purchase & sale of long-term or fixed assets as also purchase & sale of investments in stocks,bonds or acquisition of subsidiaries----- all these are considered investing cash flows.
Sale of the above mentioned items brings in cash & so results in positive cash flows.
Similarly,purchase of the above mentioned items spends cash & so results in negative cash flows.
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