Which of the following will increase equity? a. An increase in dividends paid b.

Question

Which of the following will increase equity?

a. An increase in dividends paid

b. Issuance of new stock

c. An increase in retained earnings from net income

d. Both b & c

e. All of the above

A DECREASE in Cash Flow from Operations could be caused by:

a. a decrease in fixed asset

b. an increase in inventory

c. a decrease in accruals

d. both b and c

e. all of the above

a. An increase in dividends paid

b. Issuance of new stock

c. An increase in retained earnings from net income

d. Both b & c

e. All of the above

A DECREASE in Cash Flow from Operations could be caused by:

a. a decrease in fixed asset

b. an increase in inventory

c. a decrease in accruals

d. both b and c

e. all of the above

Explanation / Answer

Answer to 1 is B

Issuance of stock would increase equity however if we issue shares from net income, it does not affect equity as it is capitalization of profits. Profits are also part of equity.

Answer to 2 is D

Increase in Inventory and decrease in accruals amount of cash outflow therefore both decrease the cash.

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