Impact On Cash Position Of A Firm On Various Situations


What would be the probable effect on a firm’s cash position of the following events?
1.    Rapidly rising sales
2.    A delay in the payment of payable
3.    A more liberal credit policy on sales (to the firm’s customers)
4.    Holding larger inventory
5.    Increase of fixed assets annual depreciation
6.    Retaining higher percent of earnings


The question belongs to Finance and it discusses about the probable effect on a firm’s cash position in events such as rapidly rising sales, delay in payments of payable, liberal credit policy on sales, holding larger inventory, increase of fixed asset annual depreciation, retaining higher percent of earnings. The effect of cash on each of the situations has been explained well in the solution.

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