Question

Characterize the following actions of a firm as financing, investing, or operating activities: Scenario Operating Activity Investing Activity Financing Activity

__Sells a tract of land it has held for years
__Increases its use of trade credit from suppliers
__Improves profit margin and increases net income
__Issues new shares of preferred stock
__Tightens its credit policy with its customers
__Buys back shares of common stock
__Buys new equipment and machinery Issues new notes payable

Answer 1

1. Sells a tract of land it has held for years - Investing Activity

2. Increases its use of trade credit from suppliers - Operating activity

3. Improves profit margin and increases net income - Operating activity

4. Issues new shares of preferred stock - Financing activity

5. Tightens its credit policy with its customers - Operating activity

6. Buys back shares of common stock - Financing activity

7. Buys new equipment and machinery - Investing Activity

8. Issues new notes payable - Financing activity