mock AM, #40 why is C incorrect following, correct, current, payment, revenue

prashantsahni

#40 Which of the following most likely increased both profitability and CFO
A - defrred revenue recognition
B- capitalization of interestcosts
C extension of payment terms with suppliers
the answer is B, but it seems to me C is also correct
(1) extension of payment terms  lower expenses in current term  higher NI  higher profitability
(2) extension of payment terms - lower expenses in current term  lower cash outflows  higher CFO

PieMan

your explanation makes sense - thank you for replying

Rasec

Its says ‘most likely’, and I dont think extension of payment terms with suppliers has any effect on your COGS, as this is accounted for using accrual accounting, and so weather you paid them or not doesnt matter, COGS is based on the products sold, and the cost of these products