Why Is a Decrease in Accounts Receivable Added to Net

question 36

Multiple Choice

Why is a decrease in accounts receivable added to net income when determining cash provided by operating activities?

• A) Cash collections from customers were greater than the sales generated.
• B) Cash collections increased due to an increase in sales.
• C) Cash collections decreased due to a decline in sales.
• D) Cash collections from customers were less than the sales reported.

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Definitions:

Nondisclosure

An agreement or clause that prohibits the sharing of confidential or proprietary information.

Clerical Error

A mistake in documentation or record-keeping that is unintentional and can usually be corrected without legal implications.

Standard-Size

Refers to products or goods made or packaged in sizes that conform to a norm or a set of norms for consistency.

Negligent Misrepresentation

A false statement made by one party to another, where there was no intention to deceive but due to carelessness, leading to damages or losses.