Final answer:
The cash collected from a customer is recorded as an operating activity in the Statement of Cash Flows, reflecting daily business operations such as sales. Investing activities involve long-term assets, and financing activities are related to funding the business.
Step-by-step explanation:
The cash collected from a customer would be recorded as an operating activity in the Statement of Cash Flows. Operating activities involve the cash inflows and outflows from a company's core business operations. This includes revenue from selling goods or services, cash paid to suppliers, and cash paid for salaries. Therefore, when a company receives money from a customer, it is part of the daily operations, and thus, it is classified under operating activities.
Investing activities refer to transactions involving the purchase or sale of long-term assets and investments. Meanwhile, financing activities include transactions related to funding the business such as issuing equity or debt.
Regarding the additional information provided for reference:
- The money listed under assets on a bank balance sheet may not actually be in the bank because banks operate under the fractional reserve system, meaning that banks loan out the majority of deposited funds while keeping a fraction as reserves. Therefore, the cash listed includes funds that are loaned out and not currently held physically in the bank.
- If you are buying loans in the secondary market:
- You would likely pay less for a loan if the borrower has been late on payments due to increased risk of default.
- You would pay less if interest rates have risen, as the existing loan would be at a lower interest rate compared to new loans.
- You may be willing to pay more if a borrower has declared high profits, as it indicates lower risk of default.
- You might pay more if interest rates have fallen, as the existing loan would now generate higher relative interest income.