Firms have some choice as to when they disburse cash.A firm may delay making payments to suppliers, employees, and others during the last several days of an accounting period and then make the cash payments during the early part of the next period.The firm
A)decreases cash flow from financing during the first period but increases cash flow from financing during the second period.
B)increases cash flow from operations during the first period but decreases cash flow from operations during the second period.
C)decreases cash flow from operations during the first period but increases cash flow from operations during the second period.
D)increases cash flow from financing during the first period but decreases cash flow from financing during the second period.
E)increases cash flow from investing during the first period but decreases cash flow from investing during the second period.

Question

Quizplus · Accepted Answer

Delaying payments to suppliers, employees, and others affects the cash flow from operations. By delaying these payments, a firm effectively retains more cash in the first period, which appears as an increase in cash flow from operations. Conversely, when these payments are made in the next period, the cash flow from operations decreases because the firm is disbursing more cash.

Firms Have Some Choice as to When They Disburse Cash