Question

Chow Company earned $5,100 of cash revenue, paid $2,800 for cash expenses, and paid a $1,100 cash dividend to its owners. Which of the following statements is true?

1) The net cash flow from operating activities is $2,300
2) The net cash flow from operating activities is $1,200
3) The net cash flow from operating activities is $3,000
4) The net cash flow from operating activities is $4,000

Answer 1

The net cash flow from operating activities for Chow Company is calculated by subtracting the cash expenses ($2,800) from the cash revenue ($5,100), which results in $2,300.

Step-by-step explanation:

When determining the net cash flow from operating activities, only the revenues and expenses related to the company's primary operations are considered.

The payment of a cash dividend is not included in this calculation as it is considered a financing activity, not an operating activity.

Therefore, the net cash flow from operating activities for Chow Company would be calculated as the cash revenue ($5,100) minus the cash expenses ($2,800), resulting in $2,300. Consequently, the correct statement is 1) The net cash flow from operating activities is $2,300.

To determine the net cash flow from operating activities, we need to calculate the difference between cash revenue and cash expenses.

In this case, the cash revenue is $5,100 and the cash expenses are $2,800, so the net cash flow from operating activities is $5,100 - $2,800 = $2,300. The statement that is true is option 1) The net cash flow from operating activities is $2,300.