Which of the following would raise a red flag about the cash-to-cash cycle when reviewing the cash flow statement?
A)Increase in both accounts receivable and accounts payable
B)Decrease in both accounts receivable and accounts payable
C)Increase in accounts receivable and decrease in accounts payable
D)Stable levels of accounts receivable and accounts payable.

Question

Quizplus · Accepted Answer

An increase in accounts receivable indicates that a company is taking longer to collect cash from its customers, while a decrease in accounts payable suggests it is paying its suppliers more quickly. Both of these trends can strain a company's cash flow, raising a red flag about its cash-to-cash cycle efficiency.

Which of the Following Would Raise a Red Flag About