-Does it make sense for a company's first month of operation to have: negative operation activities,...

-Does it make sense for a company's first month of operation to have: negative operation activities, investing activities and positive financing activities? why?

-The same company has an EPS of 0.2, what does that mean for the company's performance?

Expert Solution

Yes it makes sense for a company’s first month of operation to have negative operating activities cash flow and positive financing activities cash flow

A Company’s first month of operation can have negative cash flow from operating activities if there are no sales. Cash flow from operating activities is of main core activities of the firm. So if there are no sales there will be no operating cash flow. If expenses are incurred like employees salaries, administration cost, etc it will be negative cash flow from operations

Positive financing activities is due to contribution of capital which will be financing inflow and hence it will be positive

The EPS of 0.20 is nominal which may be due to other income generated during the year. This EPS is not significant from company’s point of view

ekkarill92 answered 2 years ago

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