Questions: Which one of these is an addition to the cash flows from investing activities? Increase in common stock Dividend paid Decrease in other long-term assets Increase in fixed assets

Which one of these is an addition to the cash flows from investing activities? Increase in common stock Dividend paid Decrease in other long-term assets Increase in fixed assets
Transcript text: Which one of these is an addition to the cash flows from investing activities? Increase in common stock Dividend paid Decrease in other long-term assets Increase in fixed assets
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Solution

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The answer is the third one: Decrease in other long-term assets.

Explanation for each option:

  1. Increase in common stock: This is related to financing activities, not investing activities. When a company issues common stock, it is raising capital, which is a financing activity.

  2. Dividend paid: This is also related to financing activities. Dividends are payments made to shareholders and are considered a use of cash in financing activities.

  3. Decrease in other long-term assets: This is an addition to the cash flows from investing activities. When a company decreases its long-term assets, it typically means it has sold or disposed of these assets, resulting in an inflow of cash.

  4. Increase in fixed assets: This is a cash outflow in investing activities. When a company increases its fixed assets, it is purchasing or investing in new assets, which uses cash.

In summary, a decrease in other long-term assets results in an inflow of cash, which is why it is considered an addition to the cash flows from investing activities.

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