A Canadian investor is analyzing a company's financial statements. They note that the company's long-term debt increased significantly, but its cash and cash equivalents also rose substantially. Which section of the cash flow statement would provide the clearest explanation for this simultaneous change?

Question: A Canadian investor is analyzing a company's financial statements. They note that the company's long-term debt increased significantly, but its cash and cash equivalents also rose substantially. Which section of the cash flow statement would provide the clearest explanation for this simultaneous change?

Answer options:

• Cash flow from operating activities
• Cash flow from investing activities ✅ Cash flow from financing activities
• Non-cash investing and financing activities

Correct answer: Cash flow from financing activities

Explanation: Cash flow from financing activities reports changes in debt, equity, and dividends. An increase in long-term debt (e.g., by issuing new bonds) would generate cash, increasing cash and cash equivalents.