Explain How a Company Could Manipulate Cash Flow from Operations

question 141

Essay

Explain how a company could manipulate cash flow from operations by changing the extent to which it factors accounts receivable and treats those factoring arrangements as sales of receivables.

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Definitions:

Progressive Tax

A tax system in which the tax rate increases as the taxable income or amount increases.

Regressive Tax

A tax system where the tax rate decreases as the taxable amount increases, disproportionately affecting lower-income earners.

Progressive Taxation

The tax as a percentage of income increases as income increases.

Proportional Taxation

The tax as a percentage of income remains constant as income increases; also called a flat tax.