Question

In: Finance

Which of the following is a source of cash? 1. The purchase of new fixed assets....

Which of the following is a source of cash?

1.

The purchase of new fixed assets.

2.

Dividends paid.

3.

The repurchase of outstanding common stock.

4.

A decrease in long-term debt.

5.

A decrease in inventory.

Solutions

Expert Solution

The correct option is Option : 5

Out of 5 options above , purchase of new fixed assets, payment of dividend, repurchase of outstanding common stock and decrease in long term debt result in outflow of cash.

However, Decrease in Inventory is a result of increase in sales. Hence it is a source of cash because the money that was tied up in inventory has been released, provided that sales has not been made on credit basis.     


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