Brandon's Boot Shop is paying off its long-term debt from the bank loan Brandon secured to open the business several years ago. What does this scenario indicate?
A) Brandon's Boot Shop has a positive amount of cash from financing activities.
B) Brandon's Boot Shop has a negative amount of cash from financing activities.
C) Brandon's Boot Shop is going out of business.
D) Brandon's Boot Shop has a negative amount of cash from operating activities.
E) Brandon's Boot Shop has a positive amount of cash from investing activities.

Question

Quizplus · Accepted Answer

This scenario indicates that Brandon's Boot Shop has a negative amount of cash from financing activities. This type of cash flow is calculated from changes in the long-term liability accounts and the contributed capital accounts in owners' equity. This amount would be negative if a company is paying off long-term debt or returning contributed capital to investors.

Brandon's Boot Shop Is Paying Off Its Long-Term Debt from the Bank