Question

In: Finance

A firm has the following account balances. Which one of the following statements is correct concerning those balances?

Account	Beginning Balance	Ending Balance
Accounts receivable	$18,700	$19,600
Accounts payable	23,100	22,800
Inventory	29,700	28,600
Long-term debt	48,400	42,600
Common stock	56,000	54,500

Group of answer choices

Accounts receivable is a $900 source of cash.

Common stock is a $1,500 source of cash.

Net working capital, excluding cash, is a $1,500 use of cash.

Long-term debt is a $5,800 source of cash.

Total debt is a $6,100 use of cash.

Expert Solution

Source of cash is when cash is received or inflow of cash in company while use of cash is when cash is paid or outflow of cash from company.

Ans- Option D

Total Debt in the beginning = Accounts Payable + Long term Debt

= $23,100 +$48,400

= 71,500

Total Debt in the End = Accounts Payable + Long term Debt

= $22,800 +$42,600

= 65,400

Difference from Ending to beginning = $65,400 - $71,500

= -$6100

As the total Debt has decreased from beginning to end which means that debt is been paid which is outflow of cash.

Thus, Total Debt of $6100 is a use of cash.

jeff jeffy answered 2 years ago

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