Fundamentals Of Corporate Finance, Tenth Standard Edition
Fundamentals Of Corporate Finance, Tenth Standard Edition
10th Edition
ISBN: 9781121571938
Author: Westerfield, Jordan, 2013 Ross
Publisher: Mcgraw-Hill
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Chapter 18, Problem 18.1CTF
Summary Introduction

To discuss: The examples of actions that increases the cash

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Explanation of Solution

Increasing long-term debt:

The borrowings in excess of the long-term are indicated by long-term debt. Companies borrow cash mainly from short-term funds or from issuing the long-term funds or bonds.

Examples: Research expenses, insurance, license fee in startup companies.

Increasing equity:

Increasing equity indicates sale of stocks, which increases the cash of the business.

Examples: Increase in retained earnings

Increasing current liabilities:

It indicates short debts are due to creditors or suppliers within a short period of 90 days.

Examples: Increase in creditors, increase in bills payable and increase in outstanding expenses.

Decreasing current assets:

Decrease in current assets will increase the current liabilities. Sale of inventories for cash will reduce the current assets.

Examples: Decrease in stocks, decrease in debtors and decrease in an accrued income

Decreasing fixed assets:

Decrease in fixed assets means the sale of some fixed assets property. This indicates the increase in cash and sources of funds.

Example: Due to damages, obsolesces, wear and tear.

Conclusion

Thus, the above-mentioned are the elements and examples of the increase in cash, which increases the level of cash of the company.

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Chapter 18 Solutions

Fundamentals Of Corporate Finance, Tenth Standard Edition

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