Rowdy's Restaurants cash flow ($ in millions)

Cash received from:

Customers $ 3,600

Interest on investments 320

Sale of land 220

Sale of Rowdy's capital stock 840

Issuance of debt securities 3,200

Cash paid for:

Interest on debt $ 420

Income tax 200

Debt principal reduction 2,700

Purchase of equipment 6,400

Purchase of inventory 2,200

Dividends on capital stock 560

Operating expenses 740

Rowdy's would report net cash inflows (outflows) from operating activities in the amount of:

A. $220 million.

B. $ (2,980) million.

C. $ (6,180) million.

D. $ (6,400) million.

Rowdy's would report net cash inflows (outflows) from operating activities in the amount of $460.

Explanation:

The cash flow statement categories the company's transactions in a financial period into 3 groups; these are operating, investing and financing.

The net profit/loss, depreciation, changes in current assets (other than cash) and liabilities are considered as operating activities including income taxes.

The sale of assets, interest received, purchase of investments are examples of investing activities while the issuance of stocks, debt principal deduction (loan settlement), issuance of debt securities etc are examples of financing activities.

Hence, net cash inflows (outflows) from operating activities

= $3600 - $200 - $2200 - $740

= $460