Question

What will be the effect on the statement of cash flows if a firm buys a...

What will be the effect on the statement of cash flows if a firm buys a new processing plant through a new loan?

      -       A.       B.       C.       D.   

Cash flow from investing activity ________________________.
      -       A.       B.       C.       D.   

Cash flow from financing activity ____________________________.
      -       A.       B.       C.       D.   

Cash flow from operating activity ______________________________.
A.

remained unchanged
B.

increased
C.

decreased
D.

can not be determined
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Answer #1

Whenever a new plant is purchased through a loan , in the statement of cash flow it will result in increase of cash inflow from financing activities and a cash outflow from investing activities. It will not have any impact on cash flow from operating activities.

Cash flow from investing activity: Decreased

Cash flow from Financing activity: Increased

Cash flow from operating activity: remained unchanged

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