1.
Introduction: A company prepares a statement of
To show: The ranking of the three companies from high to low on cash flow from operating activities.
1.
Answer to Problem 19QS
The ranking of companies is as follows:
Company | Ranking |
M | 1 |
Y | 2 |
C | 3 |
Explanation of Solution
The cash flow from operating activities shows the outflow and inflow of cash from the operations of the company. The company that has the highest positive cash flows from operating activities will have the highest rank and the company that has the negative cash flows from operating activities will have the lowest rank.
The ranking of three companies based on cash flows from operations is as follows:
Company | Cash flows from operating activities | Column |
M | $70,000 | 1 |
Y | $60,000 | 2 |
C | $(24,000) | 3 |
Company M has positive cash flows from operating activities, and it is the highest among the three companies. Therefore, its rank is 1. Company C has negative cash flows from operating activities. Therefore, its rank is 3.
2.
Introduction: A company prepares a statement of cash flow for calculating the amount of net decrease or increase in the cash balance during the year. The outflow and inflow of cash from the financing, operating, and investing activities are used to calculate the amount of decrease or increase in the cash balance during the year.
To state: The company that has the largest
2.
Answer to Problem 19QS
Company Y has the largest cash outflows for investing activities.
Explanation of Solution
The negative cash flows from the investing activities show that the company has either purchased long-term assets, or it has made some investments.
The cash flows of three companies for investing activities are as follows:
Company M = $(28,000)
Company Y = $(34,000)
Company C = $26,000
It can be seen that the cash flows of Company C are positive, and it state that the company has not made any cash outflows for investing activities. The cash outflows of Company M and Company Y are negative. The cash outflows of Company Y are higher than the cash outflows of Company M. Therefore, Company Y has the largest cash outflows for investing activities.
3.
Introduction: A company prepares a statement of cash flow for calculating the amount of net decrease or increase in the cash balance during the year. The outflow and inflow of cash from the financing, operating, and investing activities are used to calculate the amount of decrease or increase in the cash balance during the year.
To state: The company that has the largest
3.
Answer to Problem 19QS
Company C has the largest cash inflows from financing activities.
Explanation of Solution
The positive cash flows from the financing activities show that the company has received cash from issuing stocks or from borrowings.
The cash flows of three companies for financing activities are as follows:
Company M = $(6,000)
Company Y = $0
Company C = $23,000
It can be seen that the cash flows of Company M are negative which state that the company has not issued stocks, nor it made borrowings. The cash outflows of Company Y are 0 which state that the company has not made any inflow or outflow from financing activities. The cash flows of Company C are positive and highest among the three. Therefore, Company C has the largest cash inflows from financing activities.
4.
Introduction: A company prepares a statement of cash flow for calculating the amount of net decrease or increase in the cash balance during the year. The outflow and inflow of cash from the financing, operating, and investing activities are used to calculate the amount of decrease or increase in the cash balance during the year.
To state: The company that has the highest cash flow on total assets ratio.
4.
Answer to Problem 19QS
Company Yhas the highest cash flow on total assets ratio.
Explanation of Solution
Company M
Cash flow from operations = $70,000
Average total assets = $790,000
The cash flow on total assets ratio is calculated as follows:
Company Y
Cash flow from operations = $60,000
Average total assets = $625,000
The cash flow on total assets ratio is calculated as follows:
Company C
Cash flow from operations = $(24,000)
Average total assets = $300,000
The cash flow on total assets ratio is calculated as follows:
From the above calculations, it can be seen that the cash flow on the total asset ratio of company C is -8%. The ratio of company M and company Y is 8.86% and 9.60% respectively. The highest cash flow on asset ratio is 9.60%. Therefore, company Y has the highest cash flow on asset ratio.
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Chapter 12 Solutions
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