When a company increases trade payables from one year to the next, what is the effect on cash flows?
A) An increase in cash because we have not paid cash for all the inventory and services purchased on credit during the period.
B) A decrease to cash because we will have to pay these liabilities in the future.
C) A decrease in cash caused by paying down our debt to vendors.
D) An increase to cash because we have received cash from vendors.

Question

Quizplus · Accepted Answer

An increase in trade payables means the company has delayed cash payments for inventory or services, thus conserving cash and increasing cash flow.

When a Company Increases Trade Payables from One Year to the Next