Problem 11: Consider each of the following independent events from Basar Co. In each case, state...
Problem 11:
Consider each of the following independent events from Basar Co. In each case, state whether the event would increase cash flow, decrease cash flow, or leave cash flow unchanged. If cash flow increased or decreased, state whether that would affect operations, financing, or investing.
a) The company paid creditors $250,000
b) The company bought inventory on credit for $50,000.
c) The company repaid a long-term bank loan: $500,000
d) The company paid a dividend of $50,000 to the common shareholders.
Homework Answers
Answers
- Requirements:
[a] This will DECREASE the cash flow
as creditors are paid in Cash $ 250,000.
This would affect the Operation activity.
[b] This would leave Cash Flow UNCHANGED, because no cash is paid or received.
[c] This would DECREASE the cash flow
as cash will be paid to REPAY the loan.
This would affect the Financing activity.
[d] This would DECREASE the cash flow,
as dividend is PAID out in Cash.
This would also affect the Finance activity.
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Problem 11:
Consider each of the following independent events from
Basar Co. In each case, state...
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