Asked by Zachariah Andress on Jul 21, 2024
Verified
Cash provided by operating activities fails to take into account that a company must invest in new fixed assets just to maintain its current level of operations.
Operating Activities
Activities that relate to the primary operations of a company, such as selling goods and services, which generate revenue and expenses.
Fixed Assets
Long-term tangible assets used in the operations of a business, not expected to be converted to cash within a year.
Current Level
Current level often refers to the present state or condition of a measurable variable, such as production, staffing, or inventory levels.
- Acknowledge the importance of the cash flow statement in evaluating a company's fiscal wellness and predicting its future cash movements.
Verified Answer
MP
Maria PegueroJul 23, 2024
Final Answer :
True
Explanation :
Cash provided by operating activities only shows the cash flow generated by current operations, but it does not consider the cash needed for investing in new fixed assets to replace the old ones or to expand operations. Therefore, a company may have positive cash flows from operating activities but still struggle with investing in the necessary assets to maintain or grow its operations.
Learning Objectives
- Acknowledge the importance of the cash flow statement in evaluating a company's fiscal wellness and predicting its future cash movements.