Which of the following actions are most likely to directly increase cash as show
ID: 2620271 • Letter: W
Question
Which of the following actions are most likely to directly increase cash as shown on a firm’s balance sheet? Select the appropriate assumptions that underlie your answer.
It issues $6 million of new common stock.
It buys new plant and equipment at a cost of $3 million.
It reports a large loss for the year.
It increases the dividends paid on its common stock.
Statements (b) and (d) will increase the amount of cash on a company's balance sheet. Statement (a) will decrease cash through the sale of common stock. Selling stock uses cash from financing activities. On one hand, Statement (c) would decrease cash; however, it is also possible that Statement (c) would increase cash, if the firm receives a tax refund for taxes paid in a prior year.
Statements (b) and (d) will increase the amount of cash on a company's balance sheet. Statement (a) will increase cash through the sale of common stock. Selling stock provides cash through financing activities. On one hand, Statement (c) would decrease cash; however, it is also possible that Statement (c) would increase cash, if the firm receives a tax refund for taxes paid in a prior year.
Statements (b) and (d) will decrease the amount of cash on a company's balance sheet. Statement (a) will increase cash through the sale of common stock. Selling stock provides cash through financing activities. On one hand, Statement (c) would decrease cash; however, it is also possible that Statement (c) would increase cash, if the firm receives a tax refund for taxes paid in a prior year.
Statements (b) and (d) will decrease the amount of cash on a company's balance sheet. Statement (a) will decrease cash through the sale of common stock. Selling stock uses cash from financing activities. On one hand, Statement (c) would decrease cash; however, it is also possible that Statement (c) would increase cash, if the firm receives a tax refund for taxes paid in a prior year.
Statements (b) and (d) will decrease the amount of cash on a company's balance sheet. Statement (a) will increase cash through the sale of common stock. Selling stock provides cash through financing activities. Statement (c) would neither increase or decrease cash for taxes paid in a prior year.
Explanation / Answer
Answer is
Statements (b) and (d) will decrease the amount of cash on a company's balance sheet. Statement (a) will increase cash through the sale of common stock. Selling stock provides cash through financing activities. Statement (c) would neither increase or decrease cash for taxes paid in a prior year.
As purchase of plant and equipment and payment of dividend will decrease the amount of available cash while issue of common stock will increase the cash balance while large loss does not have any impact on availability of cash
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