Cash flow decisions and effects

Question 1

Directors decided to purchase new fixed assets to the value of R….

Answer 1

increases / advances=d fixed assets will improve productivity and therefore generate more income

Question 2

director decided to sell assets to the value of R….

Answer 2

Obsolete / old / ideal proceeds used to improve cash flow.
used to purchase new fixed assets
used to pay back loan

Question 3

directors decide to issue new shares to the value of R….

Answer 3

Improves cash flow

funds used to repay loan / buy asset

Question 4

the directors decided to pay R…. as repayment of loan

Answer 4

it reduces then degree of risk and improves the gearing of the company. Decreases the interest on expenses.

Question 5

Directors decide to pay dividends of R…..

Answer 5

To keep the existing shareholders happy and attract potential investors.

Question 6

ONLY USE IF FORCED TO :

Directors decided to buy back shares to the value of R…

Answer 6

This can improve the NAV and the EPS