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Fundamentals of Financial Manageme...
Fundamentals of Financial Manageme...
Why are accruals called spontaneous sources of funds, what are their costs, and why don’t firms use more of them?
To explain: The reason behind the treatment of accruals, as spontaneous source of funds and their limited use by firms. The cost of accruals to use.
Introduction:
Accruals:
The incurred expenses without payment of cash related to those expenses are termed as accruals. These are classified as current liabilities (short-term) in the financial statements.
Spontaneous source of funds:
Due tothe automatic generation of accruals without the implementation of any particular activity for its generation, these are treated as a spontaneous source of funds.
Cost of accruals
The outstanding amount related to accruals can be utilized by the company free of cost (without any charge).
Limited use:
The number of accruals depends upon the expenses related to them, which are incurred by the company during the operations...
Chapter 15 Solutions
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