Question & Answer: Mark all of the following USES of cash, i.e. when a business experiences cash out flow……

Mark all of the following USES of cash, i.e. when a business experiences cash out flow.

1. Increase in Accounts Receivable
2. Sale of PP&E
3. Purchase of subsidiary business
4. Decrease in Accounts payable
5. Decrease in Prepaid Expenses
6. Issuance of Long-Term Debt
7. Increase in Cash net income
8. Purchase of PP&E
9. Increase in Deferred taxes
10. Repayment of Long-Term Debt

Expert Answer

 

Increase in Accounts Receivable – a business does not experience cash out flow. It is an indication of increase in revenues but cash not yet received.

Sale of PP&E – a business experience cash in flow.

Purchase of subsidiary business – a business experiences cash out flow.

Decrease in Accounts payable –  a business experiences cash out flow as payments have been made to creditors.

Decrease in Prepaid Expenses – a business does not experience cash out flow. It is an indication of expiration of some prepaid expenses.

Issuance of Long-Term Debt – a business experiences cash out flow as it has provided loan.

Increase in Cash net income – a business does not experience cash out flow.

Purchase of PP&E- a business experiences cash out flow.

Increase in Deferred taxes – a business does not experience cash out flow.

Repayment of Long-Term Debt – a business experiences cash out flow.

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