Trade Receivables Arising from Sales to Customers Amounted to $35,000

question 105

Multiple Choice

Trade receivables arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Profit reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the cash flows from operating activities, prepared using the indirect method, is

• A) $155,000.
• B) $125,000.
• C) $120,000.
• D) $115,000.

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Definitions:

Credit Terms

The conditions under which credit will be extended to a customer, including the repayment period, interest rate, and any discounts for early payment.

Gross Margin Ratio

A financial metric expressing the percentage of revenue that exceeds the cost of goods sold, used to assess a company's financial health.

Net Sales

The total revenue from sales of products or services less returns, allowances, and discounts.

Cost of Goods Sold

The direct expenses related to producing goods sold by a company, including material costs and direct labor, essential for calculating a company's gross profit.