Part I - Mark with X either true or false for each question and turn in your ans

Question

Part I - Mark with X either true or false for each question and turn in your answers on this sheet. (20 marks) Question # True False 3 Question Cash = + long-term debt + equity + current liabilities - current assets other than cash-fixed assets. These are all sources of cash. Cash is the most productive asset a company can hold and that is why "cash is king". Year-end #1: Cash ? = + long-term debt 100 + capital stock 100 + opening retained earnings 50+ net income 50 + accounts payable 100 - accounts receivable 150 - inventory 50 - fixed assets 200. Year-end #2: Cash ? = + long-term debt 100 + capital stock 100 + opening retained earnings 100 + net income 0 + accounts payable 150 - accounts receivable 100 - inventory 50 - fixed assets 300. Working capital policy changes can improve cash flow, which can be used in core business activities. Sales, receivables, and inventory form the basis for cash flow, but the firm's other activities like leverage can also affect cash inflows and outflows. Under the C's approach to credit management, a Character review attempts to determine the ability of the firm to pay back loans. Operating assets are the difference between five principal current assets (cash, marketable securities, accounts receivable, equipment and inventory) and accounts payable. The conservative approach to financing a business uses long-term funding sources to finance capital assets, permanent current assets and part of temporary current assets. The top down forecast process is used for quick cash flow analysis. It is often called the percentage of sales method.

Explanation / Answer

1. True :- As Basic Accounting Equation is Assets = Liabilities + Owner Equity

2. False :- In Past decade it can be True but now a days liquid invesment are also available which can be made liquid at the time of need, also able to earn some income unlike cash.

3. True :- A change in Working Capital policy a cash flow can improve but company should bear in mind that its motive is not only to increase cash.

4. True :- Firm other activity like levrages can affect operating results and ultimately result into some impact on cash flows.

5. True :- Under 5Cs of Credit first one is Character Review in which borrower ability to repay debt is considered.

6. False :- Net operating assets (NOA) are a business's operating assets minus itsoperating liabilities. NOA is calculated by reformatting the balance sheet so that operating activities are separated from financing activities.

7. True :- Conservative Approach to Working Capital Financing. Conservative approach is a risk-free strategy of working capital financing. ... The major part of the working capital is financed by the long-term sources of funds such as equity, debentures, term loans etc.

8. True :- A top-down forecast looks at the overall market and uses this information to identify your company demographics and target mark. Hence it can be said that Top Down forecast is used for quick cash flow analysis.

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