Final answer:
An inflow of cash mainly results from 2) a decrease in liability accounts or selling assets other than cash.
Step-by-step explanation:
An inflow of cash for a company could result from various events, but specific to the choices provided: Option 1, the increase in an asset account other than cash, would not result in a cash inflow since it involves non-cash assets. Option 2, the decrease in a liability account, could result in a cash inflow if the liability is reduced through cash payments to the company. Option 3, the decrease in an equity account, typically does not result in a cash inflow and may represent a distribution of assets to owners. Option 4, the decrease in an asset account other than cash, could be indicative of a cash inflow if, for instance, the company sold off some of its assets and received cash in exchange.
The money listed under assets on a bank balance sheet may not actually be in the bank because banks operate on a fractional-reserve banking system, where they lend out the majority of the deposits they receive. As a result, the cash listed as assets would mostly be distributed in the form of loans or other investments, not physically in the bank's vault.
When buying loans in the secondary market, the value you'd be willing to pay for a loan can vary based on several factors:
- The borrower being late on loan payments decreases the loan's value due to increased risk.
- If interest rates have risen since the loan was made, the loan is less attractive because newer loans could be issued at higher rates, so its value would decrease.
- A borrower declaring high profits would make a loan more valuable, as there's a higher chance of loan repayment.
- If interest rates have fallen since the loan was made, the older loan at higher interest is more valuable, so you'd pay more.