Analysts following Armstrong Products recently noted that the company's net cash flow from operations increased over the prior year, yet cash as reported on the balance sheet decreased.Which of the following factors could explain this situation?

Question

Quizplus · Accepted Answer

The increase in net cash flow from operations suggests that the company generated more cash from its core business activities. However, the decrease in cash on the balance sheet suggests that the company used some of that cash to fund other activities, such as capital expenditures, debt payments, or dividend payments. Of the given choices, only option C (the company made a large investment in a profitable new plant) would explain this situation, as it involves a significant outflow of cash for a productive investment. The other choices all involve inflows of cash that would increase the reported balance of cash on the balance sheet, rather than decreasing it.

Analysts Following Armstrong Products Recently Noted That the Company's Net