If a company reports negative net cash flows from operating activities, positive net cash flows from investing activities, and zero net cash flows from financing activities, this suggests that the company is selling its productive assets to cover its operating activities outflows.

Question

Quizplus · Accepted Answer

Negative net cash flows from operating activities indicate that the company is spending more cash on its operations than it is generating from its core business. Positive net cash flows from investing activities suggest that the company is selling or disposing of productive assets, such as property, plant, and equipment, to generate cash inflows. Zero net cash flows from financing activities imply that the company is not raising additional capital or repaying debt during the period. Therefore, selling productive assets could be a possible source of cash inflow for the company to cover its operating activities outflows.

If a Company Reports Negative Net Cash Flows from Operating