The Statement of Cash Flows for Georgey Company for 2004

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.

Correct Answer:

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