When Cash Is Received in Payment of an Account Receivable

question 63

Multiple Choice

When cash is received in payment of an account receivable, which section of the Statement of Cash Flows is affected?

• A) Cash Flow from Operating Activities
• B) Cash Flow from Investing Activities
• C) Cash Flow from Financing Activities
• D) There is no effect on the Statement of Cash Flows.

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Definitions:

Operating Cash Flow

The financial output derived from a company's core business practices.

Capital Spending

Expenditures by a company for physical assets such as property, industrial buildings, or equipment, intended to improve its long-term capacity or efficiency.

Salvage Value

An asset's expected market price at the conclusion of its effective life.

Incremental Cash Flow

Consists of the additional operating cash flow an organization receives from taking on a new project.