The CEO of Home Store was concerned about the companys drop in cash from $130,000 at the beginning of the year to $32,000 at the end of the year. The $98,000 decrease in cash came primarily from the purchase of a forklift, which was paid in cash rather than being financed.

a. Identify whether the cash payment for the purchase of equipment would appear in the operating, investing, or financing activities section of the statement of cash flows.

b. Explain why a small increase in cash from operating activities might be more concerning to investors than a large decrease in cash from investing or financing activities.