Concept explainers
To discuss: The examples of actions that increases the cash
Explanation of Solution
Increasing long-term debt:
The borrowings in excess of the long-term are indicated by long-term debt. Companies borrow cash mainly from short-term funds or from issuing the long-term funds or bonds.
Examples: Research expenses, insurance, license fee in startup companies.
Increasing equity:
Increasing equity indicates sale of stocks, which increases the cash of the business.
Examples: Increase in
Increasing current liabilities:
It indicates short debts are due to creditors or suppliers within a short period of 90 days.
Examples: Increase in creditors, increase in bills payable and increase in outstanding expenses.
Decreasing current assets:
Decrease in current assets will increase the current liabilities. Sale of inventories for cash will reduce the current assets.
Examples: Decrease in stocks, decrease in debtors and decrease in an accrued income
Decreasing fixed assets:
Decrease in fixed assets means the sale of some fixed assets property. This indicates the increase in cash and sources of funds.
Example: Due to damages, obsolesces, wear and tear.
Thus, the above-mentioned are the elements and examples of the increase in cash, which increases the level of cash of the company.
Want to see more full solutions like this?
Chapter 18 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE A
- What is the Objective: Useful Information about Net Cash Inflows to the Company, and why is it important?arrow_forwardWhich of the following would be considered a cash outflow for investing activities? a. cash paid to purchase product for inventory b. cash paid to reacquire common stock c. cash paid to repay debt d. cash paid to purchase equipmentarrow_forwardExplain the term Cash Equivalency?arrow_forward
- what is the optimum cash balance? Please answer it in good form. Thank youarrow_forwardGive some examples of Discounted cash flow?arrow_forwardWhat is meant by an incremental cash flow? What do you need to ask yourself when deciding whether a cash flow is incremental or not? What types of incremental cash flows are there?arrow_forward
- What methods can be used to speed up a firm’s cash inflows?arrow_forwardDescribe the process of computing the equivalent cash value?arrow_forwardWhich of the following is an advantage of the cash payback method? a. takes into consideration the time value of money b. easy to use c. includes the cash flow over the entire life of the proposal d. emphasizes accounting incomearrow_forward
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning