You are analyzing a startup company. Of course, it has a negative operating cash flow early on. But as you further analyze the company, what must you consider?

Select an answer:

• Having a negative operating cash flow is fine if it is offset by investing activities.
• A negative operating cash flow is not a concern if the company has a significant amount of loans.
• A negative operating cash flow for a startup business is expected in the long-term.
• Having a negative operating cash flow is not sustainable in the long-term.

JelCo's backup warehouse suffered fire damage, and had to be sold at a loss. What effect will this have on JelCo's operating cash flow?

Select an answer:

• JelCo's operating cash flow will be offset by selling the warehouse at a loss.

• JelCo's operating cash flow will be reduced because they can no longer take depreciation expense on the warehouse.

• JelCo will receive an influx of operating cash because even though it was sold at a loss, JelCo did receive cash from the sale.

• JelCo's operating cash flow will not be affected, as long as losing the warehouse did not affect sales.

Machine Partners has a positive free cash flow, with cash from investigating activities five times the cash from operating activities. What red flag does this raise?

Select an answer:

• Machine Partners is borrowing more cash than it is able to repay.

• Machine Partners is not doing well in keeping its operating expenses down.

• Machine Partners is unable to raise capital from its investors.

• Machine Partners is selling off its production capacity and not replacing it.

FarmCo, a farming supply company, is the dream of Meg and Leroy Jones. They have significant funds from the will of Leroy's mother. To remain viable, which calculation must FarmCo make?

Select an answer:

• cash-burn rate combined with available cash

• revenue minus the amount of available cash

• revenue combined with the cash-burn rate

• cash-burn rate plus the initial investment in FarmCo

Wood Brothers manufactures hockey sticks that it sells to sporting goods retailers. What data best describes Wood Brothers' operating cycle?

Select an answer:

• the 43 days to make the hockey sticks, plus the 60 days to ship to its retail customer the orders needed to fill its customers' orders

• the 43 days to make hockey sticks after buying birch wood, plus the number of days in inventory

• the 43 days to make the hockey sticks after buying birch wood from customers, plus the 90 days until customers pay for them

• the 43 days it takes to make hockey sticks after buying birch wood from its vendors, plus the credit terms from the vendor