ABA Inc.’s summary Statement of Cash Flow is as follows: Cash Flow from Operatin
ID: 2615017 • Letter: A
Question
ABA Inc.’s summary Statement of Cash Flow is as follows:
Cash Flow from Operating Activities $ (200)
Cash Flow from Investing Activities (1000)
Cash Flow from Financing Activities (250)
Cash and Marketable Securities beginning of yr 700
Is it possible to have negative figures in all three cash flow categories? Is the company’s Statement of Cash Flow a cause for concern? Explain.
Explanation / Answer
Yes, it is possible to have negative cash flow for all the three categories of cash flow statement. When the business has more cash outflow than compared to cash inflows, it is said to have negative cash flows, in the case of operating activities, when there is more repayment of debtors than credit sales and when the credit purchases are lower than the repayment to creditors, the operating activities cash flow shall have negative cash flows. Same is the case with the investing and financing activities, where the repayments and outflows are more than the inflows or credit purchases, the cash flow shall have negative balance. Yes this shall be a cause of concern for the business since the cashflow is advisable to be positive rather than being negative. when the payables are more than receivables the cash flow shall also be negative in most of the cases.