Question

When liabilities increase, this means that the firm has borrowed money or received contributions from shareholders. Therefore, increases in liabilities represent increases in cash. Group of answer choices True False

Answer 1

Answer:

The answer is true

Explanation:

Increasing Liabilities is increasing cash inflow. For example, if a firm borrows money from a bank, it increases its liabilities and also increases its cash account because the bank will credit the firm with the borrowed form.

Also, if shareholders contribution increase by way of funding the company, the cash is being injected into the firm, thereby increasing the cash reserves.

Therefore, the answer to the question is true.