Question

Determine how the following scenarios affect the firm's cash position. Identify whether the scenario describes a financing, investing, or operating activity (as defined on the Statement of Cash Flows). Scenario Operating Activity Investing Activity Financing Activity Sell a tract of land it has held for years Pay preferred stock dividends Increase accrued liabilities Sell some old equipment Issue shares of common stock Increase inventory holdings Buy property for a future factory Now, indicate which of the scenarios below are expected to increase a company's cash flow. Check all that apply. Increase accrued liabilities Increase inventory holdings Sell some old equipment Issue shares of common stock Pay preferred stock dividends

Answer 1

Answer:

Scenario                                                           Description

Sell a tract of land it has held for years          Investing

Pay preferred stock dividends                        Financing

Increase accrued liabilities                              Investing

Sell some old equipment                                 Operating

Issue shares of common stock                        Financing

Increase inventory holdings                             Operating

Buy property for a future factory                      Investing

Also, Scenarios that are expected to increase a company’ cash-flow are Issue shares of common stock, Increase accrued liabilities and Sell some old equipment.