Reading 34: Understanding the Cash Flow Statement-LOS g 习题精 2011, activities, financing, interpret, accounts

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Session 8: Financial Reporting and Analysis: The Income Statement, Balance Sheet, and Cash Flow Statement
Reading 34: Understanding the Cash Flow Statement

LOS g: Analyze and interpret a cash flow statement.

 

 

How does decreasing accounts payable turnover affect a company’s cash flow from financing activities and is this source of cash sustainable?

Financing cash flow

Sustainable source

A) No impact No

B) Increase No

C) No impact Yes

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Decreasing accounts payable turnover saves cash by delaying payments to suppliers. The result is an operating source of cash, not a financing source. Decreasing accounts payable turnover is not a sustainable source of cash flow because suppliers will refuse to extend credit, at some point, if payment is slower and slower.