How many of the following items decrease cash flow in the statement of cash flows? • Increase in accounts receivable
• Increase in notes payable
• Depreciation expense
• Increase in investments
• Decrease in accounts payable
• Decrease in prepaid expenses
• Dividend payment
• Increase in accrued expenses
A) Two of these items decrease cash flow
B) Three of these items decrease cash flow
C) Four of these items decrease cash flow
D) Five of these items decrease cash flow

Question

Quizplus · Accepted Answer

The items that decrease cash flow are:
- Increase in accounts receivable: when customers owe the company more money, it means that cash is not received immediately and cash flow decreases.
- Increase in notes payable: when the company takes out a loan or issues bonds, cash flow decreases because the company receives cash now but will have to pay it back later with interest.
- Dividend payment: paying dividends to shareholders reduces cash flow because it is an outflow of cash from the company.
- Increase in accrued expenses: when the company owes money for expenses but has not paid them yet, cash flow decreases because cash is not being paid out immediately.

Therefore, four of the items listed decrease cash flow.

How Many of the Following Items Decrease Cash Flow in the Statement