Indicate effect of following transactions on net long-term financing (NLF), working capital requirement (WCR), net short term financing (NSF), and net profit. Use + to indicate an increase,- to indicate a decrease and 0 to indicate no effect.
NLF WCR NSF Net profit
Shares ar issued for cash
Goods from inventory are sold for cash
Goods from inventory are sold on account
A fixed asset is sold for cash for less than book value.
A fixed asset is sold for cash for more than book value
Corporate inc ome tax is paid.
Payment is made to trade creditors.
Cash is obtained through a short term bank loan.
Cash is obtained through a long term bank loan.
A cash dividens iss declared and paid.
Accounts receivable and paid.
Merchandise is purchased on account.
Cash advances are made to employees.
Monthly interest in a firm is acquired for cash.
Equipment is acquired for cash.
2. Indicate the effect of the following transaction on the working capital.
a.More customers pay with cash instead of credit.
b.More if raw material is paid for with cash.
c.More discounts are offered to customers.
d.More finish goods are produced for order.
The solution discusses transaction effects to NLF, working capital, short term financing, and net profit.