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

Question

Quizplus · Accepted Answer

When a company increases trade payables from one year to the next, it means that they have purchased more inventory or services on credit during the period. This results in an increase in accounts payable, which is a liability that the company owes to its vendors. As long as the company has not yet paid off these liabilities, they have more cash available to use for other purposes. Therefore, this increase in trade payables leads to an increase in cash flow.

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