In 1998, firm A's financial statements showed the following:
Net income = $23,000 -
Operating cash flows = $10,000 -
Financing cash flows = $24,000 -
Non-cash expenses = $19,000 -
Change in cash accounts = $6,500
Cash spent on acquiring operating capacity = $19,000
Then, the investing cash flow of the firm in 1998 was ________.
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A. B. C. D.A
Operating + Financing + Investing cash flows = change in cash accounts. Hence, Investing cash flow = 6,500-10,000-24,000 = -$27,500.
To calculate the investing cash flow of the firm in 1998, we need to consider the information provided in the question.
The statement mentions the following: Net income = $23,000 Operating cash flows = $10,000 Financing cash flows = $24,000 Non-cash expenses = $19,000 Change in cash accounts = $6,500 Cash spent on acquiring operating capacity = $19,000
Investing cash flows represent cash flows related to the acquisition or sale of long-term assets, such as property, plant, and equipment, as well as investments in other companies. To calculate investing cash flows, we need to determine the change in long-term assets or investments during the period.
The formula to calculate investing cash flows is as follows: Investing Cash Flows = Change in Long-term Assets + Change in Investments
Given the information provided, we can break down the components:
Change in Long-term Assets = Cash spent on acquiring operating capacity Change in Investments = 0 (no information provided about investments in other companies)
Substituting the values into the formula, we have:
Investing Cash Flows = $19,000 + $0 Investing Cash Flows = $19,000
Therefore, the investing cash flow of the firm in 1998 is $19,000.
None of the provided answer options matches the correct result.