10. BlueSky will need less financing because it is essentially borrowing more from its suppliers. Among
Solutions to Questions and Problems
NOTE: All end of chapter problems were solved using a spreadsheet. Many problems require multiple steps.
Due to space and readability constraints, when these intermediate steps are included in this solutions
manual, rounding may appear to have occurred. However, the final answer for each problem is found
without rounding during any step in the problem.
1. a. No change. A dividend paid for by the sale of debt will not change cash since the cash raised from
the debt offer goes immediately to shareholders.
b. No change. The real estate is paid for by the cash raised from the debt, so this will not change the
c. No change. Inventory and accounts payable will increase, but neither will impact the cash account.
d. Decrease. The short-term bank loan is repaid with cash, which will reduce the cash balance.
e. Decrease. The payment of taxes is a cash transaction.
f. Decrease. The preferred stock will be repurchased with cash.
g. No change. Accounts receivable will increase, but cash will not increase until the sales are paid
h. Decrease. The interest is paid with cash, which will reduce the cash balance.
i. Increase. When payments for previous sales, or accounts receivable, are paid off, the cash balance
increases since the payment must be made in cash.
j. Decrease. The accounts payable are reduced through cash payments to suppliers.
k. Decrease. Here the dividend payments are made with cash, which is generally the case. This is
different from part a where debt was raised to make the dividend payment.
l. No change. The short-term note will not change the cash balance.
m. Decrease. The utility bills must be paid in cash.
n. Decrease. A cash payment will reduce cash.
o. Increase. If marketable securities are sold, the company will receive cash from the sale.