Reasons Why Liquidity Will Decrease
Below are some reasons why a company's liquidity can decrease. They are organized according to the format of the statement of cash flows.
Net loss from the business operations
Accounts receivable increased
Prepaid expenses increased
Accounts payable decreased
Capital expenditures (purchase of equipment, etc.)
Purchase of long-term investments
Repayment of short-term and long-term debt
Declaring dividends for stockholders
Purchase of treasury stock
Sole proprietor's or partners' draws
Since the above items will have an unfavorable or negative effect on a company's liquidity, the respective amounts will appear on the SCF in parentheses.
Reasons Why Liquidity Will Increase
Below are some reasons associated with an increase in a company's cash and liquidity. The reasons are arranged according to the format of the statement of cash flows.
Net income from the business operations
Accounts receivable decreased
Prepaid expenses decreased
Accounts payable increased
Proceeds from the sale of assets used in the business
Proceeds from the sale of long-term investments
Short-term and long-term borrowings
Proceeds from issuing shares of common and preferred stock
Proceeds from sale of treasury stock
Since the above items will have a favorable or positive effect on a company's liquidity, their amounts will appear on the statement of cash flows as positive amounts.
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