A firm's cash account grew by $300 over the year when the firm had cash flow from financing of −$150 and cash flow from investing of $100. The firm's operating cash flow must have been +$250.

Question

Quizplus · Accepted Answer

The firm's cash flow statement can be represented as:

Operating Cash Flow (OCF) = $250
Cash Flow from Investing Activities (CFIA) = $100
Cash Flow from Financing Activities (CFFA) = -$150

Net Increase in Cash = CFIA + CFFA = $100 - $150 = -$50

This means that the firm's cash account should have decreased by $50 over the year, contradicting the given information that it grew by $300. Therefore, the statement is false.

A Firm's Cash Account Grew by $300 Over the Year