LG5 13. Which of the following activities result in an increase (decrease) in a

Question

LG5 13. Which of the following activities result in an increase (decrease) in a firm’s cash?

     a. decreases fixed assets:

     b. decrease accounts payable:

     c. pays dividends:

     d. sells common stock:

     e. decrease accounts receivable:

     f. increase notes payable:

LG5 14. What is the difference between cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities?

LG6 17. What does the Sarbanes-Oxley Act require of firm managers?

Explanation / Answer

Question 1.(LG5 13.)

solution: (a) Decrease fixed assets = Increase in cash (i.e. sale of FA )

(b) Decrease accounts payable = Decrease in cash (i.e. payment to suppliers)

(c) Pays dividends = Decrease in cash ( since its being a payment of cash to shareholders)

(d) Sells common stcok = Increase in cash ( since sell of common stock would result inflow of cash for issuance)

(e) Decrease accounts receivable = Increase in cash (i.e. Amount received from Debtors)

(f) Increase in notes payable = Increase in cash ( i.e. Issuance of notes for cash being results in increase in firm's cash)

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