The cash flow to creditors includes the cash:
A) received by the firm when payments are paid to suppliers.
B) outflow of the firm when new debt is acquired.
C) outflow when interest is paid on outstanding debt.
D) inflow when accounts payable decreases.
E) received when long-term debt is paid off.

Question

Quizplus · Accepted Answer

Cash flow to creditors represents the cash paid out by the firm to its creditors, including interest payments on outstanding debt. Therefore, option C is correct as it represents cash outflow when interest is paid on outstanding debt. The other options are incorrect, as they represent cash received by the firm (options A and D) or cash outflow associated with acquiring new debt (option B) or paying off long-term debt (option E), which are not relevant to cash flow to creditors.

The Cash Flow to Creditors Includes the Cash