Operating cash ﬂow must be positive when:
A)capital spending exceeds any tax payments due.
B)the cash ﬂow generated by business activities exceeds any tax payments due.
C)changes in net working capital exceeds the cash ﬂow generated by business activities.
D)the cash ﬂows generated by investing activities exceeds the cash ﬂows generated by ﬁnancing activities.
E)the cash ﬂows generated by ﬁnancing activities exceeds any tax payments due.

Question

Quizplus · Accepted Answer

Operating cash flow represents the cash generated from the main business activities of a company. Therefore, to have a positive operating cash flow, it is essential that the cash generated from business activities exceeds any tax payments due. Option A is incorrect because excessive capital spending will reduce the company's cash flow. Option C is incorrect because changes in net working capital are also part of the operating cash flow. Option D is incorrect because the cash flow generated by investing activities and financing activities are not part of the operating cash flow. Option E is incorrect because the cash flow generated by financing activities does not reflect the company's main business operations.

Operating Cash ﬂOw Must Be Positive When