Assume a Firm Generates $2,000 in Sales and Has a $500

question 7

Multiple Choice

Assume a firm generates $2,000 in sales and has a $500 increase in accounts receivable during an accounting period.Based solely on this information,cash flow will increase by:

• A) $2,500.
• B) $2,000.
• C) $1,500.
• D) $500.

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Definitions:

Merger Transaction

A corporate action where two or more companies are consolidated into one entity, often to enhance competitiveness or grow market share.

Accounts Payable

Liabilities owed by a company to creditors or suppliers for goods and services received but not yet paid for.

Operating Activities

Activities directly related to the day-to-day operations of a business, including the production, sales, and delivery of the company's product and services.

Indirect Method

A way of calculating cash flows in the cash flow statement, where net income is adjusted for changes in balance sheet accounts to reflect cash transactions.