Which of the following will increase cash flow?Working capital requirements decreaseEstimate of salvage value increasesDepreciation expenses increaseNone of the aboveAll of the above
Question
Which of the following will increase cash flow?Working capital requirements decreaseEstimate of salvage value increasesDepreciation expenses increaseNone of the aboveAll of the above
Solution
All of the above options can increase cash flow:
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Working capital requirements decrease: Working capital is the difference between a company's current assets and current liabilities. If the requirements decrease, it means the company needs less money for its day-to-day operations, which can increase the cash flow.
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Estimate of salvage value increases: The salvage value is the estimated resale value of an asset at the end of its useful life. If this value increases, it means the company can get more money when it sells the asset, which can increase the cash flow.
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Depreciation expenses increase: Depreciation is a non-cash expense, which means it reduces the company's earnings but does not involve an actual cash outflow. Therefore, an increase in depreciation expenses can increase the cash flow by reducing the taxable income.
So, the answer is "All of the above".
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