Analysts who follow Howe Industries recently noted that, relative to the previous year, the company's operating net cash flow increased, yet cash as reported on the balance sheet decreased.Which of the following factors could explain this situation?
A)The company cut its dividend.
B)The company made a large investment in a profitable new plant.
C)The company sold a division and received cash in return.
D)The company issued new common stock.
E)The company issued new long-term debt.

Question

Quizplus · Accepted Answer

The increase in operating net cash flow indicates that the company's core business is generating more cash, but the decrease in cash on the balance sheet suggests that the company is investing in something. Option B indicates that the company made a large investment in a profitable new plant, which would explain the decrease in cash on the balance sheet. The other options do not provide a clear explanation for the situation described.

Analysts Who Follow Howe Industries Recently Noted That, Relative to the Previous