Which action would, all else equal, likely increase the revolver balance?

• A. Increase in minimum cash balance
• B. Increase in accounts payable
• C. Higher cash flow from operations
• D. Increase in inventories

Answer: (A)

Revolver balance shows how much is drawn on a revolving credit facility to fund short-term liquidity needs. The action that most directly pushes this balance higher is increasing the minimum cash cushion. If you require more cash to be held on hand and other funding sources stay the same, you’d need to borrow more on the revolver to meet that higher cash minimum, raising the revolver balance.

The other options either ease liquidity or shift funding in ways that don’t force as direct an increase in revolver borrowings: delaying payments through higher accounts payable reduces cash outflows; higher cash flow from operations adds cash to the balance sheet and reduces the need to borrow; increasing inventories ties up cash, but its impact depends on how cash is funded, whereas raising the minimum cash balance directly creates a larger funding gap that the revolver is used to fill.