The Statement of Cash Flows for Georgey Company for 2004

question 7

Multiple Choice

The statement of cash flows for Georgey Company for 2004 and 2005 is as follows:
$\begin{array}{lrr}&2004&2005\\ \text {Net income}&\$189&\$170\\ \text {Adjustments to reconcile net income to net cash provided by operating }\\ \text {activities:}\\\text { Depreciation and amortization } & 201 & 173 \\\text { Deferred income taxes } & 14 & (20) \\\text { Restructuring charges } & 80 & 90 \\\text { Accounts receivable } & 30 & 20 \\\text { Inventory } & (30) & 50 \\\text { Current liabilities } & 10 & 30 \\\text { Cash flow from operations } & 494 & 513\\\\\text { Sale of equipment } &200&300\\ \text { Purchase of equipment } &(130) &(120) \\ \text { Cash flow from investing } &70&180\\\\ \text { Dividends } &(120) &(130) \\ \text { Long-term debt } &(440) &(440) \\ \text { Cash flow from financing } &(650) &(570) \\\end{array}$



-The cash flow from operations and cash flow from investing are both positive. Which of the following best describes the situation of Georgey?

• A)The cash flow statement would indicate there are no reasons for concern.
• B)Repayment of long-term debt indicates the company is becoming more profitable.
• C)Georgey appears to be liquidating assets of the company that may affect future profitability.
• D)Increased operating and investing cash flows in 2005, relative to 2004 indicate increased profitability of Georgey in 2005.