Top trade co has been trading for a number of years and is currently going through a period of expansion. An extract from SOCF for Y/E 31 dec 20X7 for Top trades co is
Net cash from operating activities 995
Net cash used in investing activities (540)
Net cash used in financing activities (200)
Net increase in cash and cash equivalent 255
Cash and cash equivalent at beginning of period 200
Cash and cash equivalent at end of period 455
Which of the following statement is correct according to extract of top trades co SOCF?
a)Company has good working capital management
b)Existing non current assets have been sold to cover cost of additions to non current assets
c)Net cash generated from financing activities has been used to fund additions of non current assets
d)Net cash generated from operating activities has been used to fund additions of non current assets
Correct answer is d but please can you explain?
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Mcq on cashflow
The net cash from operating activities is positive implying that there is an inflow of cash, and the cash flow from investing activities is negative implying that cash has been spent. The cash spent here cannot have come from the investing activities as this is also a negative figure, so the cash must have come from the operating activities.
Thanks
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