As Credit Standards Are Relaxed, Sales Are Expected to ________

question 183

Multiple Choice

As credit standards are relaxed, sales are expected to ________ and the investment in accounts receivable is expected to ________.

• A) increase; increase
• B) increase; decrease
• C) decrease; decrease
• D) decrease; increase

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Definitions:

Indirect Method

A technique used in cash flow statement preparation that adjusts net income for changes in balance sheet accounts to calculate operating cash flow.

Operating Activities

Cash flow actions related to the day-to-day operations of a business, such as receiving cash from customers and paying suppliers.

Direct Method

An allocation method that directly assigns service department costs to producing departments without any intermediate allocations.

Direct Method

A way of preparing a cash flow statement where actual cash flows from operating activities are reported instead of adjusting net income for non-cash items.