Analyse and comment on the impact of the following events on a companies balance sheet, income statement
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- Analyse and comment on the impact of the following events on a companies balance sheet, income statement and cash flow statement.E.g. Company purchases Machinery for $100,000 in cash.Effect. Obvious impactFixed Asset increased, Balance sheet affected.Company will start recording depreciation expense in Income StatementCash Outflow will reduce balance of cash on balance sheet. Current Ratio likely affected adversely and Working Capital.Analysis.Company may experience increase in Accounts Payable because of such a substantial cash outflow. This will affect Current Liabilities.Or. Company may have to seek short term loan from the bank as a back up in case there is any disturbance in receivables in the future. To counter this substantial cash outflow. Company should have negotiated with a bank a low interest loan to purchase machine over time in instalments
- .1)A Manufacturing company ABC: relies on several suppliers for raw materials, often these materials are purchased on 90 days credit. A key supplier cancels the line of credit to the company ABC due to late payments. Discuss the impact will have on the company. Think cash conversion cycle, ratios etc.
Related Book For
Financial Accounting and Reporting
ISBN: 978-0273744443
14th Edition
Authors: Barry Elliott, Jamie Elliott
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