{"id":215942,"date":"2025-05-18T08:00:59","date_gmt":"2025-05-18T08:00:59","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=215942"},"modified":"2025-05-18T08:01:02","modified_gmt":"2025-05-18T08:01:02","slug":"which-one-of-the-following-is-a-source-of-cash","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/18\/which-one-of-the-following-is-a-source-of-cash\/","title":{"rendered":"Which One Of The Following Is A Source Of Cash"},"content":{"rendered":"\n<p>Which One Of The Following Is A Source Of Cash? Multiple Choice<\/p>\n\n\n\n<p>Repurchase Of Common Stock<br>Acquisition Of Debt<br>Purchase Of Inventory<br>Payment To A Supplier<br>Granting Credit To A Customer<br>Which One Of The Following Is A Source Of Cash? Multiple Choice<\/p>\n\n\n\n<p>Increase In Accounts Receivable<br>Decrease In Common Stock<br>Increase In Fixed Assets<br>Decrease In Accounts Payable<br>Decrease In Inventory<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-1-color\">The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Question 1:<\/h3>\n\n\n\n<p><strong>Which One Of The Following Is A Source Of Cash?<\/strong><br><strong>Correct Answer:<\/strong> <strong>Acquisition of Debt<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Question 2:<\/h3>\n\n\n\n<p><strong>Which One Of The Following Is A Source Of Cash?<\/strong><br><strong>Correct Answer:<\/strong> <strong>Decrease in Inventory<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation (Combined for Both Questions \u2014 300+ Words):<\/h3>\n\n\n\n<p>In financial accounting, <strong>a source of cash<\/strong> refers to any activity or transaction that <strong>increases the cash inflows<\/strong> of a business. This is critical for assessing a company&#8217;s liquidity and ability to fund operations, invest, or repay obligations.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Question 1 Analysis:<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Repurchase of Common Stock<\/strong> \u2013 This is <strong>not<\/strong> a source of cash. When a company buys back its own stock, it uses up cash, making it a <strong>use of cash<\/strong>.<\/li>\n\n\n\n<li><strong>Acquisition of Debt<\/strong> \u2013 This <strong>is<\/strong> a source of cash. When a company takes on new debt (e.g., through issuing bonds or borrowing a loan), it receives cash inflow. This increases the company\u2019s financing but also adds a future obligation to repay.<\/li>\n\n\n\n<li><strong>Purchase of Inventory<\/strong> \u2013 This is a <strong>use of cash<\/strong>. Buying inventory requires spending money, decreasing the cash available.<\/li>\n\n\n\n<li><strong>Payment to a Supplier<\/strong> \u2013 Also a <strong>use of cash<\/strong>. Paying off accounts payable or suppliers directly reduces the company\u2019s cash.<\/li>\n\n\n\n<li><strong>Granting Credit to a Customer<\/strong> \u2013 This means allowing the customer to pay later (increasing accounts receivable), which ties up cash, making it a <strong>use<\/strong> rather than a source.<\/li>\n<\/ul>\n\n\n\n<p>Thus, <strong>Acquisition of Debt<\/strong> stands out as the correct source of cash in this set.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Question 2 Analysis:<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Increase in Accounts Receivable<\/strong> \u2013 This is a <strong>use of cash<\/strong>, as more money is tied up in credit sales not yet collected.<\/li>\n\n\n\n<li><strong>Decrease in Common Stock<\/strong> \u2013 This implies the company repurchased its stock, which uses cash \u2014 again a <strong>use<\/strong>, not a source.<\/li>\n\n\n\n<li><strong>Increase in Fixed Assets<\/strong> \u2013 Buying assets like property or equipment requires spending cash, hence it\u2019s a <strong>use<\/strong> of cash.<\/li>\n\n\n\n<li><strong>Decrease in Accounts Payable<\/strong> \u2013 Paying off liabilities reduces cash; another <strong>use<\/strong>.<\/li>\n\n\n\n<li><strong>Decrease in Inventory<\/strong> \u2013 This <strong>is<\/strong> a source of cash. It means the company is either selling more inventory or not purchasing new stock, which helps free up cash.<\/li>\n<\/ul>\n\n\n\n<p>Therefore, <strong>Decrease in Inventory<\/strong> is correctly identified as a <strong>source of cash<\/strong> in this context.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Summary:<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Sources of Cash<\/strong>: Activities that bring cash <strong>into<\/strong> the business.<\/li>\n\n\n\n<li><strong>Correct Answers<\/strong>:\n<ul class=\"wp-block-list\">\n<li>Q1: <strong>Acquisition of Debt<\/strong><\/li>\n\n\n\n<li>Q2: <strong>Decrease in Inventory<\/strong><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Which One Of The Following Is A Source Of Cash? Multiple Choice Repurchase Of Common StockAcquisition Of DebtPurchase Of InventoryPayment To A SupplierGranting Credit To A CustomerWhich One Of The Following Is A Source Of Cash? Multiple Choice Increase In Accounts ReceivableDecrease In Common StockIncrease In Fixed AssetsDecrease In Accounts PayableDecrease In Inventory The Correct [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-215942","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/215942","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=215942"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/215942\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=215942"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=215942"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=215942"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}