Question

Which of the following will result in flow of Cash?

Options

• Purchase of furniture by issue of debentures.

• Discount received from suppliers on making payment.

• Conversion of debentures into shares.

• Redemption of debentures.

Answer 1

Redemption of debentures.

Explanation:

Redemption of debentures results in a flow of cash because it involves the actual repayment of a liability, which requires the company to pay out liquid funds to debenture holders, causing an outflow of cash. In contrast, purchasing furniture by issuing debentures or converting debentures into shares are non-cash structural exchanges where assets or liabilities are traded directly for securities without any monetary movement. A discount received from suppliers is simply a bookkeeping entry that reduces a payable balance rather than creating a physical flow of funds.