A bank credit manager, while reviewing a company's cash ﬂow statement, noticed that the company reported a large increase in inventory, but no increase in accounts receivable. Which of the following is not a possible explanation for this?

Question

Quizplus · Accepted Answer

C) The company increased its credit terms but not its production time. This choice does not explain the lack of increase in accounts receivable alongside an increase in inventory. Increasing credit terms would likely increase accounts receivable if sales were made on credit, not affect inventory levels directly without sales.

A Bank Credit Manager, While Reviewing a Company's Cash ﬂOw