Question

If c co.'s trade receivables balance was $1,666 million in 20x2 and $1,798 million in 20x3, what would be the impact on the statement of cash flows?

a. an increase in cash flow from investing activities
b. a decrease in cash flow from operating activities
c. a decrease in cash flow from investing activities
d. an increase in cash flow from operating activities

Answer 1

An increase in C Co.'s trade receivables from $1,666 million to $1,798 million indicates more sales on credit and would cause a decrease in cash flow from operating activities until the receivables are collected.

Step-by-step explanation:

If C Co.'s trade receivables balance increased from $1,666 million in 20x2 to $1,798 million in 20x3, the impact on the statement of cash flows would be a decrease in cash flow from operating activities. This is because an increase in trade receivables implies that the company has made more sales on credit, but has not yet received the cash. As a result, while revenues might increase, actual cash flows from operations do not reflect this until the money is collected.