Which of the following will decrease cumulative borrowing on the cash budget?
A) A decrease in interest expense
B) A decrease in collections
C) An increase in equipment purchases
D) Both A and B

Question

Quizplus · Accepted Answer

A decrease in interest expense will directly reduce the amount needed for borrowing since less money will be spent on interest payments. A decrease in collections implies less cash inflow, which might seem counterintuitive, but it does not directly affect cumulative borrowing in the context of reducing existing borrowing levels; it's more about the inflow of cash. The correct interpretation hinges on understanding that decreasing expenses (like interest) directly reduces the need for additional borrowing, while decreasing collections primarily affects cash flow rather than borrowing needs directly.

Which of the Following Will Decrease Cumulative Borrowing on the Cash