Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN: 9781285595047
Author: Weil
Publisher: Cengage
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QuickServe, a chain of convenience stores, was experiencing some serious cash flow difficultiesbecause of rapid growth. The company did not generate sufficient cash from operating activities tofinance its new stores, and creditors were not willing to lend money because the company had notproduced any income for the previous three years. The new controller for QuickServe proposeda reduction in the estimated life of store equipment to increase depreciation expense; thus, “wecan improve cash flows from operating activities because depreciation expense is added back onthe statement of cash flows.” Other executives were not sure that this was a good idea because theincrease in depreciation would make it more difficult to report positive earnings: “Without income,the bank will never lend us money.”Required:What action would you recommend for QuickServe? Why?
Which of the following actions are most likely to directly increase cash asshown on a firm’s balance sheet? Explain and state the assumptions that underlie your answer.a. It issues $4 million of new common stock.b. It buys new plant and equipment at a cost of $3 million.c. It reports a large loss for the year.d. It increases the dividends paid on its common stock.
Which of the following actions are most likely to directly increase cash as shown on a firms balance sheet? Explain and state the assumptions that underlie your answer.
a. It issues $4 million of new common stock.
b. It buys new plant and equipment at a cost of $3 million
c. It reports a large loss for the year
d. It increases the dividends paid on its common stock
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