Which one of the following is a source of cash for a tax-exempt firm?
A) Increase in accounts receivable
B) Increase in depreciation
C) Decrease in accounts payable
D) Increase in common stock
E) Increase in inventory

Question

Quizplus · Accepted Answer

An increase in common stock represents a source of cash for a tax-exempt firm. When a firm issues new shares of common stock, it receives cash in return. This is a common way for firms to raise capital, and it is particularly attractive for tax-exempt firms because they do not have to pay taxes on the proceeds from stock issuances. Options A, B, C, and E do not represent sources of cash; instead, they represent changes in balance sheet accounts that could either increase or decrease a firm's cash balance, depending on the circumstances.

Which One of the Following Is a Source of Cash