If a firm generates $2,000 in sales and has a $500 increase in accounts receivable during an accounting period,based on these two categories cash flow will increase by:

Question

Quizplus · Accepted Answer

The increase in accounts receivable indicates that the revenue has been generated on credit, but not yet collected in cash. Therefore, cash flow has not increased by the full $2,000 in sales, but by only the amount of sales that have been collected in cash, which would be $1,500 ($2,000 - $500).

If a Firm Generates $2,000 in Sales and Has a $500