Final answer:
It is true (option a) that the statement of cash flows reports a firm's cash activities over a period. This includes operating, investing, and financing activities, which are essential for understanding the company's cash management. Firms can raise capital by borrowing or issuing equity, each with its own advantages and trade-offs.
Step-by-step explanation:
The statement that a firm's operating, investing, and financing activities on cash flows over an accounting period are reported in the statement of cash flows is true. This statement is a crucial financial document that reflects how a company manages its cash resources and provides insights into its liquidity and solvency. When accessing financial capital, firms can choose to borrow money from a bank, issue bonds, or issue stock. Borrowing has the disadvantage of committing the firm to scheduled interest payments regardless of income but allows the firm to maintain control. Issuing stock means selling off company ownership and answering to a board of directors and shareholders. For small businesses, issuing stock can be advantageous as they are not obligated to make payments, whereas borrowing or issuing bonds requires interest payments. Venture capitalists may invest in these companies, offering not only capital but also strategic oversight, which helps mitigate the issues of imperfect information compared to typical shareholders.