Which of the following statements is true?
A) A 10% increase in sales has a smaller impact on cash flow than a 10% reduction in cost of sales.
B) A 10% increase in sales has the same impact on cash flow than a 10% reduction in cost of sales.
C) A 10% increase in sales has a larger impact on cash flow than a 10% reduction in cost of sales.
D) A 10% increase in sales has a smaller impact on after-tax profits than a 10% reduction in cost of sales.
E) None of the above

Question

Quizplus · Accepted Answer

A 10% increase in sales directly impacts cash inflow, while a 10% reduction in cost of sales impacts cash outflow. Since a 10% increase in sales directly increases cash inflow, it has a larger impact on cash flow than a 10% reduction in cost of sales. Therefore, option C is true.

Which of the Following Statements Is True