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

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.