A Firm That "Stretches" Its Accounts Payable Rather Than Paying

question 137

True/False

A firm that "stretches" its accounts payable rather than paying on net terms is actually increasing its calculated cost of credit given that it already does not take discounts when offered, other things held constant.

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Definitions:

Treasury Stock

Represents shares that were previously issued but have been bought back by the company and are held in its treasury.

Dividends Paid

The portion of a company's earnings distributed to shareholders, usually in the form of cash or additional shares.

Cash Flow

The sum of funds flowing in and out of a company, notably influencing its ability to meet short-term obligations.

Investing Activities

Transactions involving the purchase or sale of long-term assets and investments, a component of a company's cash flow statement.