For Each of the Following Scenarios,determine If It Is an Indicator

question 67

Essay

For each of the following scenarios,determine if it is an indicator of potential cash flow problems:
                                                                                    Potential future cash
                                                                                      flow problems
                                                                                         Yes/No
a.Growth in accounts receivable or inventories that is less the growth rate in sales.
b.Increases in accounts payable that exceed the increase in inventories.
c.Capital expenditures that substantially exceed cash flow from operations.
d.Sales of marketable securities are less than purchases of marketable securities.
e.Other operating current liabilities that grow at a lesser rate than sales.
f.A reduction or elimination of dividend payments
g.A substantial shift from long-term borrowing to short-term borrowing.

---

Definitions:

Journal Entry

A record in the books of accounts that reflects the details of a financial transaction, including the accounts affected, date, and amounts.

Gross Accounts Receivable Approach

A method that estimates the total amount to be received from customers, without deducting expected bad debts.

Unadjusted Year End

The fiscal year-end date prior to any adjustments made for accounting purposes.

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account column totals that are equal, used to ensure the accounting system's mathematical accuracy.