Which one of the following is a use of cash? increase in notes payable increase in...

Which one of the following is a use of cash?

		increase in notes payable
		increase in inventory
		increase in long-term debt
		decrease in accounts receivable
		increase in common stock

Solutions

Expert Solution

In the cash flow statement, a use of cash means a cash outflow from the organization. The options are explained below

Increase in notes payable – Notes payable is a source of funding for the organization and is shown under financing activities of the cash flow statement. So, this option is not correct

Increase in inventory means funds are being blocked in inventory and so this is a use of cash. So, this option is the correct option

Increase in long-term debt – Long term debt is a source of funding for the organization and is shown under financing activities of the cash flow statement. So, this option is not correct

Decrease in accounts receivable – A decrease in accounts receivable means that cash has been received from accounts receivable and so this is a source of funds. So, this option is also not correct

Increase in common stock – Common stock is a source of funding for the organization and is shown under financing activities of the cash flow statement. So, this option is not correct

So, as per above discussion, option B is the correct option

jeff jeffy answered 1 year ago

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