Here $100, $200, $300, -$400 and -$100, $200, -$100, $200 meet the definition of normal cash flows as they both exhibit a pattern of alternating positive and negative cash flows. Here options A and D are correct.
Normal cash flows typically involve a pattern where positive cash flows are followed by negative cash flows or vice versa. This reflects a regular operating cycle, such as investing in a project, generating returns, and then possibly facing costs or expenses.
a) $100, $200, $300, -$400: This pattern starts with positive cash flows and ends with a negative cash flow, which is characteristic of normal cash flows. Therefore, option (a) meets the definition.
b) -$500, $200, $300, $400: This option starts with a significant negative cash flow, followed by positive cash flows. Although it doesn't follow the typical pattern of normal cash flows, it could still be considered acceptable depending on the context.
c) -$400, $300, $200, -$100: This option exhibits a mix of positive and negative cash flows without a clear pattern. It might not align perfectly with the definition of normal cash flows.
d) -$100, $200, -$100, $200: This pattern alternates between positive and negative cash flows, which is a characteristic of normal cash flows. Therefore, option (d) also meets the definition. Here options A and D are correct.
Complete question:
Which one of these sets of cash flows meets the definition of normal cash flows?
a) $100, $200, $300, -$400
b) -$500, $200, $300, $400
c) -$400, $300, $200, -$100
d) -$100, $200, -$100, $200