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A firm's cash flow from investing activities includes:

A. Cash received from the sale of a plant asset

B. Cash received from the rendering of services to customers

C. Cash paid as dividends

D. Cash paid to retire bonds payable

1 Answer

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Final answer:

A firm's cash flow from investing activities includes cash received from the sale of a plant asset. This is because investing activities pertain to long-term assets and their impact on future revenue. The other options mentioned belong to operating and financing activities, not investing activities.

Step-by-step explanation:

A firm's cash flow from investing activities includes various transactions related to long-term assets. Specifically, cash received from the sale of a plant asset is a part of investing activities because it relates to the disposition of assets that are used to generate future revenue for the business.

Other options such as cash received from the rendering of services to customers, cash paid as dividends, and cash paid to retire bonds payable are not part of investing activities. Instead, they belong to operating activities and financing activities, respectively. Operating activities include transactions that are part of the firm's primary operations, while financing activities relate to how a firm finances its operations by raising capital and repaying investors.

Investing in long-term assets like machinery, plants, and research and development is crucial for a firm's growth. The returns on these investments are expected to materialize over time, enhancing the company's reinvesting capabilities and future cash flows. This aligns with the concept that successful reinvestment can generate additional sales and a larger cash flow, crucial for a company's continued growth and profitability.

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