CFA Level 1: Impact of Cash Flows on Year-End Statements

Cash Flows and Year-End Statements

Prev Question Next Question

Question

A firm needs to purchase 20 warehouses in various states. To finance the purchases, it issues new shares in a seasoned equity offering. It also issues high coupon bonds on which interest must be paid semi-annually. If the firm purchases the warehouses at the beginning of the year, which of the cash flows will be affected in the year-end statements?

Investing Operating Financing -

I.affected affected affected -

II.affected affected unaffected -

III.affected unaffected affected

IV.unaffected unaffected unaffected

Answers

Explanations

Click on the arrows to vote for the correct answer

A. B. C. D.

A

The purchase of the warehouses affects the investing cash flows. The bonds and equity offering affect the financing cash flows. These transactions do not affect operating cash flow immediately. The interest payments on the issued debt, however, will affect it. In addition, the dividends paid on the new equity will affect financing cash flows.

Prev Question Next Question