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Questions and Answers
What does an increase in accounts payable indicate?
How does an increase in accounts payable affect the company's cash flow?
What financial statement is directly impacted by an increase in accounts payable?
Study Notes
Accounts Payable Impact
- An increase in accounts payable indicates that a company is buying more goods or services on credit, which delays payment to suppliers.
- This delayed payment allows the company to hold onto its cash for a longer period, thereby improving its cash flow.
Cash Flow Effect
- An increase in accounts payable reduces the need for immediate cash outlays, thus increasing the company's available cash.
Financial Statement Impact
- The balance sheet is directly impacted by an increase in accounts payable, as it is a liabilities account that increases with higher payment obligations.
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Description
Test your knowledge of accounts payable with this quiz. Learn about the impact of an increase in accounts payable on a company's financials and cash flow. Identify the financial statement directly affected by changes in accounts payable.
