which of the statements below is true?\na decreases in accounts payable constitute a source of cash flow…

which of the statements below is true?\na decreases in accounts payable constitute a source of cash flow because you are using your suppliers to help finance your business operations.\nb the increase in working capital accounts necessary to support a project also provides for cost increases at the end of the project.\nc decreases in accounts receivable constitute a use of cash flow because you are helping your customers finance their purchases.\nd an increase in working capital can be brought about by an increase in inventory or accounts receivable.\ne none of these are correct

which of the statements below is true?\na decreases in accounts payable constitute a source of cash flow because you are using your suppliers to help finance your business operations.\nb the increase in working capital accounts necessary to support a project also provides for cost increases at the end of the project.\nc decreases in accounts receivable constitute a use of cash flow because you are helping your customers finance their purchases.\nd an increase in working capital can be brought about by an increase in inventory or accounts receivable.\ne none of these are correct

Answer

Brief Explanations:

  • Option A: Decreases in accounts payable mean the firm is paying off its suppliers, which is a use of cash, not a source. So, this option is incorrect.
  • Option B: The increase in working - capital accounts (like inventory, accounts receivable) is a use of cash. For example, if inventory increases, cash is used to purchase that inventory. So, this option is incorrect.
  • Option C: Decreases in accounts receivable mean customers are paying the firm, which is a source of cash, not a use. So, this option is incorrect.
  • Option D: An increase in working capital (e.g., when inventory or accounts receivable increase) is a use of cash. When the project ends, the working - capital investment is recovered. For example, if there was an increase in inventory for the project, at the end of the project, the unsold inventory can be liquidated (converted back to cash in a sense) or accounts receivable are collected. So, the statement in option D is incorrect.

Answer:

E. None of these are correct