The Amount of Increase in Accounts Receivable Is Added to Credit

question 71

True/False

The amount of increase in accounts receivable is added to credit sales to calculate the amount of cash inflow from customers when using the direct method to prepare the operating activities section of the statement of cash flows.

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Definitions:

Inventory Turnover

A ratio showing how many times a company's inventory is sold and replaced over a period, indicating the efficiency of inventory management.

Days' Sales Uncollected

A financial metric that measures how long it takes, on average, for a company to collect cash from its credit sales.

Profit Margin

A financial metric that measures the amount of net income earned with each dollar of sales generated by comparing the profit and the revenue.

Total Asset Turnover

A financial measure that calculates the ability of a company to turn its assets into sales revenue.