In a statement of cash flows, a company investing in short-term financial investments and in fixed assets results in______________?
Correct answer: B. Decreased cash
- A. Increased cash
- B. Decreased cash
- C. Increased liabilities
- D. Increased equity
Explanation
Purchasing short-term investments and fixed assets uses cash, so both transactions are investing cash outflows and reduce the company’s cash balance. They do not directly increase liabilities or equity.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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