How would a $5,000 increase in AR and a $2,000 decrease in inventory affect cash?
A) $5,000 source; $2,000 use
B) $2,000 source; $5,000 use
C) $5,000 source; $2,000 source
D) $3,000 source
E) $7,000 source

Question

Quizplus · Accepted Answer

An increase in accounts receivable (AR) is a use of cash because it represents sales made on credit, reducing cash flow by $5,000. A decrease in inventory is a source of cash because it indicates that inventory has been sold, increasing cash flow by $2,000.

How Would a $5,000 Increase in AR and a $2,000