Explain how the accounts receivable, inventory, power and equipment, accounts payable, wages payable and long-term debt...

Explain how the accounts receivable, inventory, power and equipment, accounts payable, wages payable and long-term debt impacted cash flow from one year to the next.

200-word minimum.

Expert Solution

Explanation of the Accounts receivable, Inventory, Power and Equipment, Accounts payable, Wages payable and Long term debt impacted cash flow from one year to the next.

Accounts Receivable and Inventory.

These are the current assets of the company and the company has the rights on above to realize. In cash flow, if the accounts receivable and Inventory will increase means have to make more credit sale and purchase inventory than it represents outflow of cash whereas if decrease than it represents an inflow of cash to the company means the company will realize or convert its stocks and receivable into cash.

Power and Equipments:

If more power and equipment are consumed in the company than the company has to purchase more and more that means outflow of cash from the company similarly low consumption results a saving for the company.

Accounts payable, Wages Payable.

These are the current liabilities of the company and the company has the obligation on above to repay it. In cash flow, if the accounts payable and wages payable will increase means have to make more payment to meet the obligations. then it represents an inflow of cash whereas if decrease than it represents an outflow of cash to the company means the company will repay its obligations.

Long Term Debts

It is the outside liabilities of the company which can be long term in nature. the company can raise debt in the form of the debenture, loans, Bonds from a bank, government and financial institute. when the company raise funds from others that would be considered as an inflow of cash and repayment of debt would be an outflow of cash. debt component bears interest and interest is an operating activity whereas repayment of debt is financing activities.

overally we can say that if there is an asset increase in the company that would result into outflow of the cash and if the assets are decreased than it may be inflow of cash into the company

Similarly, if Liabilities are decreases then cash will outflow and if liabilities increase then it would result into a saving of cash of the company

jeff jeffy answered 2 years ago

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