Use the following chart for questions 84-88.

-Based on the chart above which company profile will be fit the cash flow pattern for scenario 2?
A) Successful, but actively relocating using financing from operations with cash from creditors and shareholders.
B) Struggling, but using cash inflows from the sale of capital assets and new borrowings to remain in operation.
C) Successful, mature company that is downsizing and returning capital to shareholders and repaying debt.
D) Struggling, but using existing cash balances to cover losses, purchase capital assets and repay creditors.

Question

Use the following chart for questions 84-88.
 
-Based on the chart above which company profile will be fit the cash flow pattern for scenario 2?
A) Successful, but actively relocating using financing from operations with cash from creditors and shareholders. 
B) Struggling, but using cash inflows from the sale of capital assets and new borrowings to remain in operation. 
C) Successful, mature company that is downsizing and returning capital to shareholders and repaying debt. 
D) Struggling, but using existing cash balances to cover losses, purchase capital assets and repay creditors.

Quizplus · Accepted Answer

The cash flow pattern for scenario 2 shows a decrease in operating activities and an increase in investing activities, which is consistent with a mature company that is downsizing and returning capital to shareholders and repaying debt. Option A is incorrect because the cash flow from financing activities is negative, indicating that the company is not using financing from operations to relocate actively. Option B is incorrect because the company is not generating enough cash inflows from operating activities to remain in operation. Option D is incorrect because the company is not using existing cash balances to cover losses.

Use the Following Chart for Questions 84-88