Cash provided by operating activities fails to take into account that a company must invest in new fixed assets just to maintain its current level of operations.

Question

Quizplus · Accepted Answer

Cash provided by operating activities only shows the cash flow generated by current operations, but it does not consider the cash needed for investing in new fixed assets to replace the old ones or to expand operations. Therefore, a company may have positive cash flows from operating activities but still struggle with investing in the necessary assets to maintain or grow its operations.

Cash Provided by Operating Activities Fails to Take into Account