Final answer:
The sale of equipment for a note receivable is classified as an investment activity in the statement of cash flows.
Step-by-step explanation:
The cashflow activity of selling equipment for a note receivable is classified as an investment activity in the statement of cash flows. When equipment is sold for a note receivable, it indicates that the company is receiving a promise from the buyer to pay for the equipment over time. This falls under the investing category because it represents the company's investment in the note receivable.
The sale of equipment for a note receivable is classified as an investing activity because it involves disposing of a long-term asset. The money listed on a bank’s assets may not be present in cash since banks lend out most of it and hold investments. The value of a loan in the secondary market is impacted by the borrower's payment history, overall interest rate movements, and the borrower's profitability.
The sale of equipment for a note receivable is classified as an investing activity. This classification is due to the fact that investing activities include transactions involving the purchase and sale of long-term assets and other investments. When a company sells equipment, it is disposing of a long-term asset, which falls under investing activities, regardless of whether the proceeds are in the form of cash or a note receivable (an IOU from the buyer to be paid in the future).
Money listed under assets on a bank balance sheet may not actually be in the bank because banks use the majority of their deposits to extend loans to other customers, which is recorded as an asset due to the expectation of future repayments. Additionally, banks invest in various securities that are also considered assets, even though these funds are not physically present as cash in the bank.
When buying loans in the secondary market, one would be willing to pay:
Less for a loan if the borrower has a history of late payments as it indicates higher risk.
More or less for a loan if interest rates have risen; the old loan would be less attractive if new loans offer higher returns, but this can also depend on the creditworthiness of the borrower and other loan features.
More for a loan if the borrower is a firm that just declared high profits as it signifies better repayment capability.
More for a loan if interest rates have fallen since the loan was made, as the loan's fixed interest rate becomes more valuable compared to newly issued loans with lower rates.