Question

Analyst who follow Howe Industries recently noted that, relative to the previous year, the company's operating net cash flow invreased, yet cash as reported on the balance sheet decreased. Which of the following factors could explain this situation? A. The company cut its dividend. B. The company made a large investment in a profitable new plant. C. The company sold a division and received cash in return. D. The company issued new common stock. E. The company issued new long-term debt.

Answer 1

B. The company made a large investment in a profitable new plant.

Step-by-step explanation:

Cash reported on the balance sheet is net of cash from operating activities, investing activities and financing activities.

Investment in plant is an investing activity which will reduce operating cash flows.

Whereas issuance of stock, long term debt and cut in dividend is a financing activity which will increase company cash flows.