Question

Suppose a corporation's cash flow statement shows an increase in cash. Which of the following transactions could contribute to the cash increase?

  

A decrease in accounts payable

   

A decrease in accounts receivable

   

A decrease in long-term bonds

   

An increase in inventory

   

None of the above.

Answer 1

Answer :

A decrease in accounts receivable

Notes:

1. A decrease in accounts payable : This would lead to a decrease in cash as there would be an outflow for payments to be made.

2. A decrease in accounts receivable: This would lead to a increase in cash as there would be an inflow of cash for the accounts receivable to decrease.

3. A decrease in long-term bonds would lead to a decrease in cash as there would be an outflow to pay for the bonds.

4. An increase in inventory would lead to a decrease in cash as there would be an outflow to purchase the inventory.