Question

The investing activities section of the statement of cash flows includes cash receipts and payments related to long-term assets during the period.

A. True
B. False

Answer 1

The statement that the investing activities section of the statement of cash flows includes cash receipts and payments related to long-term assets is true. This section reflects the company's transactions involving long-term assets like property and investment securities and is crucial for investors to understand the company's financial strategies.

Step-by-step explanation:

The statement is true. The investing activities section of the statement of cash flows indeed includes cash receipts and payments related to long-term assets during the period. This section is a critical component of the statement of cash flows, which is a financial report that provides information on how a company generates and uses cash and cash equivalents over a specific period. Investing activities typically involve transactions related to the acquisition and disposal of long-term assets such as property, plant, equipment, and investment securities. These transactions can include cash paid for the acquisition of these assets, as well as cash receipts from the sale of investments or fixed assets.

Understanding the cash flows from investing activities is vital for stakeholders to assess a company's investment strategies and its ability to generate future cash flows. It's an indicator of a company's growth and capital expenditure decisions. The statement of cash flows complements other financial statements, such as the income statement and balance sheet, providing a more comprehensive understanding of a company's financial health.

Answer 2

The correct option is A. True, since the investing activities section of the statement of cash flows includes transactions related to long-term assets such as purchases or sales of property and investments.

Step-by-step explanation:

The question pertains to the cash flow statement, specifically the investing activities section. This section details the cash inflows and outflows resulting from transactions involving long-term assets. The statement is true; investing activities include the purchase and sale of long-term assets like property, plant, and equipment, as well as investments in other companies. It does not include current assets or inventory, which are considered part of operating activities. Therefore, the correct option is A. True.

Understanding the statement of cash flows is crucial as it provides insights into a company's financial health, particularly in terms of liquidity and financial flexibility. The statement is divided into three parts: operating, investing, and financing activities. All of which cumulatively affect the company's cash position. Long-term assets are essential for the ongoing operations of a company, and the investing activities section provides transparency on how a company is allocating its long-term capital.