ITPEC FE Morning April 2022 Question 80
ITPEC FE Morning April 2022 — Question 80 of 80
The goal of cash flow improvement is to accelerate cash inflows and delay cash outflows.
- •Shortening the collection period for accounts receivable means customers pay sooner, putting cash in hand faster — this directly improves cash flow.
Why not others:
- (a) Paying notes payable sooner accelerates cash outflows — worsens cash flow.
- (b) Receiving payment on notes receivable later delays cash inflows — worsens cash flow.
- (d) Shortening the payment period for accounts payable means paying suppliers sooner — cash leaves faster, worsening cash flow. The correct strategy is to extend payable timelines.
Key rule: Improve cash flow by collecting receivables faster and paying payables slower.
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