A services firm does all its business in cash only. The firm projects a cash balance of $4,000 in its account after all taxes and costs are paid. The owners plan to invest $7,000 and pay a dividend of $1,000. How much net new financing is needed?
A) $4,000
B) $5,000
C) $6,000
D) $7,000

Question

Quizplus · Accepted Answer

A) Net new financing = Investment + dividend - cash on hand
Net new financing = $7,000 + $1,000 - $4,000 = $4,000

A Services Firm Does All Its Business in Cash Only