What is the effect on profit and cash of a firm paying a trade creditor?

Name: What is the effect on profit and cash of a firm paying a trade creditor?
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Question

Quizplus · Accepted Answer

When a firm pays a trade creditor, it does not directly impact the profit as there is no change in revenue or expenses. However, it does decrease the cash balance of the firm, as cash is being used to pay the creditor. Hence, the correct option is B, which states that there is no effect on profit but a decrease in cash.

What Is the Effect on Profit and Cash of a Firm