If a company is growing, it is common to expect purchases, inventory, and _______.
A)accounts receivable to grow at different rates
B)accounts payable to grow at different rates
C)accounts payable to grow at approximately the same rates
D)accounts receivable to grow at approximately the same rates

Question

Quizplus · Accepted Answer

When a company is growing, it is common for both purchases and inventory to increase. As a result, the company may need to rely on more generous credit terms from suppliers, which would cause accounts payable to increase at approximately the same rate as purchases and inventory. Accounts receivable, on the other hand, will depend on the company's collections processes and the credit terms offered to customers, and therefore may not necessarily grow at the same rate as purchases and inventory. Therefore, the best choice is C: accounts payable to grow at approximately the same rates.

If a Company Is Growing, It Is Common to Expect