Which of the following illustrates an inflow of cash? a. a decrease in common stock b. a decrease in long-term debt c. a decrease in inventory d. an increase in fixed assets

Question

Business

Reagan Sexton

8 March, 10:37

Which of the following illustrates an inflow of cash? a. a decrease in common stock b. a decrease in long-term debt c. a decrease in inventory d. an increase in fixed assets

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Answers (1)

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Alana Butler · Answer 1

The answer is C.

Explanation:

A decrease in inventory means customers are buying inventories (goods) from the business. It is an inflow because money comes in.

Option A is incorrect because a decrease in common stock means shareholders are withdrawing their shareholding from the business and the business will pay them. This is an outflow.

Option B is incorrect because a decrease in long term debt means the business is paying its debt or redcuing its liability and this is an outflow.

Option D is also incorrect because an increase in fixed assets means the business is buying this asset with cash and this is an outflow