Analyzing the cash flow statement may help analysts determine the financial health of a company.Which of the following signs below is not an indicator of a financially healthy company?
A) The company's operations are a major source (not a use) of cash.
B) The company's operations are a major use (not a source) of cash.
C) The company's investing activities include more purchases than sales of non-current assets.
D) The company's financing activities are not dominated by borrowing.

Question

Quizplus · Accepted Answer

If a company's operations are a major use of cash, it indicates that the company is not generating enough cash flow from its operations to support its activities. This could be a sign of financial distress, as the company may need to rely on external sources of financing to stay afloat. The other choices, A, C, and D, are indicators of a financially healthy company, as they suggest that the company is generating sufficient cash flow from its operations, is investing in non-current assets to support future growth, and is not overly reliant on borrowing to finance its activities.

Analyzing the Cash Flow Statement May Help Analysts Determine the Financial