A firm with positive cash flow from financing Is using their excess cash to pay down their debt, buy back stock and pay dividends Is using debt and/or equity financing to grow their asset base and/or cover negative cash flow from operations

A firm with positive cash flow from financing Is using their excess cash to pay down their debt, buy back stock and pay dividends Is using debt and/or equity financing to grow their asset base and/or cover negative cash flow from operations

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A firm with positive cash flow from financing

Is using their excess cash to pay down their debt, buy back stock and pay dividends

Is using debt and/or equity financing to grow their asset base and/or cover negative cash flow from operations

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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Similar questions

d) Did the cash flow from operations cover the dividend payment made by the firm (if any)?e) If the firm has generated excess cash from operations, how did the firm invest the excess cash? If not, what were the sources of cash the firm used to pay for the capital expenditures and/or dividends? h) What other major items affected cash flows for the firm?f) What was the trend in capital expenditures for the firm?
Consider the following statement: "The estimation of the Free Cash Flow to the Firm (FCF) considers investment decisions but ignores financing decisions." Is this statement true or false? Explain your answer.
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with the help of the statement of income attached please answer the below: explain the trend in the net borrowing (proceeds from borrowing less payments of short- and long-term debt) of the firm? explain the trend in working capital accounts? Critically evaluate the financial strength of each of the companie based on the evidence presented in the Statement of Cash Flow.
Examine the key reasons why a business may not want to hold too much or too little working capital. Provide examples that illustrate the consequences of either situation. Explain alternative ways a business can use free cash flow. Provide examples.
a) Did the cash flow from operations cover the dividend payment made by the firm (if any)?b) If the firm has generated excess cash from operations, how did the firm invest the excess cash? If not, what were the sources of cash the firm used to pay for the capital expenditures and/or dividends? c) What other major items affected cash flows for the firm?d) What was the trend in capital expenditures for the firm?
Which of these is a main characteristic of debt capital?(a) Investors in debt participate in the ownership of the firm.(b) Investors in debt are paid interest.(c) Debt is more risky for the investor and less risky for the firm.(d) If dividends are not paid, this can lead to foreclosure, legal proceeding and financial distress.
Suppose managers of a firm know that the company is approaching financial distress. Should the managers borrow from creditors and issue a large one-time dividend to shareholders? How might creditors control this potential transfer of wealth?
Can a firm have income without also having a positive cash flow? Explain.
In looking at Free Cash Flow, which of the following is true? The value of any asset business is based solely on the free cash flow and it is important to buyers and sellers. FCF's are the discounts received from vendors for purchases made The net income of a company should be equal to its free cash flow. FCF's represent the funds available to business owners that can be withdrawn after all business related costs and investments have been paid.