When a Company Increases Trade Payables from One Year to the Next

question 84

Multiple Choice

When a company increases trade payables from one year to the next, what is the effect on cash flows?

• A) An increase in cash because we have not paid cash for all the inventory and services purchased on credit during the period.
• B) A decrease to cash because we will have to pay these liabilities in the future.
• C) A decrease in cash caused by paying down our debt to vendors.
• D) An increase to cash because we have received cash from vendors.

Understand the role and implications of finance leases in commercial transactions.

Understand the definition and role of a merchant as per Article 2 of the UCC.

Identify provisions in Article 2 that exclusively apply to merchants.

Comprehend key concepts in Article 2 including good faith, unconscionability, and expansion of commercial practices.

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Definitions:

Refurbish

Describes the process of cleaning, decorating, and re-equipping something to improve its appearance or functionality.

Maximum Permissible

The highest amount or level of something that is allowed by legal or regulatory standards.

Commercially Impracticable

A legal principle that excuses a party from fulfilling a contract if unforeseen events make it extremely difficult or costly to do so.

Major Reconstruction

Involves significant rebuilding or making extensive repairs to a structure or infrastructure, usually to restore its usability or to improve its functionality.