Question

. Which of the following statements is CORRECT? Tecf ceh eñle the effects of buying or selling fixed assets. b. The statement of cash flows shows where the firm's cash is located; indeed, it provides a listing of all banks and brokerage houses where cash is on deposit. c. The statement of cash flows reflects cash flows from continuing operations, but it does not reflect the effects of changes in working capital. d. The statement of cash flows reflects cash flows from operations and from borrowings, but it does not reflect cash obtained by selling new common stock. e. The statement of cash flows shows how much the firm's cash--the total of currency, bank deposits, and short-term liquid securities (or cash equivalents)--increased or decreased during a given year.

Answer 1

Answer: e

Cash flow statement indicates the statement of operating activities, investing activities, and financing activities. Therefore, it includes selling and buying of fixed assets under the investing activities, deposit is a part of it under the investing activities but it is not the whole cash flow, working capital changes must come under the operating activities, and sale of common stocks must come under the financing activities.

Option e covers the whole. Therefore, this is correct.