Question : Decrease in Cash Credit. would result in inflow/outflow/no flow of Cash and Cash Equivalents:
Option 1: Inflow of cash
Option 2: Outflow of cash
Option 3: Neither inflow Nor outflow
Option 4: Cash and cash equivalent
Answer (1)
24th Jan, 2024
Correct Answer: Outflow of cash
Solution :
Answer =
Outflow of cash
A decrease in cash credit signifies a reduction in the available borrowing limit. If a business uses this credit line to withdraw funds, it leads to a decrease in their cash and cash equivalents. Cash credit is treated as a short-term borrowing facility offered by banks.
Hence, the correct option is 2.
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