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    Question

    Which transaction results in flow of

    funds?
    A Purchase of one new machine in exchange of two old machines Correct Answer Incorrect Answer
    B Conversion of debentures into shares Correct Answer Incorrect Answer
    C Transfers to general reserve Correct Answer Incorrect Answer
    D Raising a long term loan Correct Answer Incorrect Answer

    Solution

    When a company raises a long-term loan, it involves borrowing funds from external sources, typically from banks or financial institutions. The funds obtained through the loan are recorded as a liability on the company's balance sheet since they represent an obligation to repay the borrowed amount over time. This transaction leads to the flow of funds into the company, increasing its available cash or resources.

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