Shan is responsible for managing the accounts payable team for her Signal Signage Company. She ensures the team does not make payments immediately after receiving an invoice, while also ensuring that payment due dates are not missed. Why would Shan manage the accounts payable process in this manner?
A) to eliminate trade credit and maximize investment returns
B) to decrease interest fees and increase leverage
C) to reduce solvency and improve profitability
D) to avoid interest fees and allow for investment returns
E) to minimize taxes and avoid interest fees

Question

Quizplus · Accepted Answer

Shan's strategy of not paying invoices immediately but ensuring they are paid by the due date allows the company to retain cash longer, potentially earning interest or investing it for returns, without incurring late fees or interest charges. This approach does not directly relate to minimizing taxes, eliminating trade credit, decreasing solvency, or specifically increasing leverage, but rather focuses on optimizing cash flow to benefit from holding onto cash as long as possible without penalty.

Shan Is Responsible for Managing the Accounts Payable Team for Her