MENU
Which of the following always impact negatively on a company's cash flow? Select TWO that ap-ply
Suggested Answer: B, D
Get Premium L4M2 Questions
as Interactive Web-Based Practice Test or PDF
Real Exam Format
Detailed Explanations
Instant Access
Get Your Practice Test
To answer this question, candidates are required to remember the cash flow cycle and cost entries as well as the impact of their timing on a business.
Source: https://cfoperspective.com/free-your-cash-trapped-in-the-cash-conversion-cycle/
Shorter payment term and more inventory are likely to have negative impact on the cash flow be-cause the buyer has to pay sooner and greater.
'Customers agree to pay immediately' will increase the organisation's bank account sooner.
Depreciation has no impact on cash flow as it is only listed in Profit and Loss statement.
Increasing revenue may have negative or positive impact on cash flow, depending on the real situation.
LO 1, AC 1.4
37 comments · newest first
MO
Mose
11 months ago
Wait, customers paying immediately? How is that bad?
LA
Lashawn
11 months ago
Supplier shortening payment terms? That's a cash flow killer!
MO
Mona
12 months ago
Depreciation doesn't impact cash flow directly, just accounting.
GE
Georgene
12 months ago
I disagree, increasing revenue usually helps cash flow!
CA
Carline
1 year ago
More inventory definitely ties up cash.
LI
Lindsay
1 year ago
I feel like customers paying immediately would actually help cash flow, so I’m leaning towards more inventory and the supplier issue.
TH
Thora
1 year ago
Supplier shortening their payment period definitely sounds like it would hurt cash flow, but I wonder if increasing revenue could offset that.
JO
Jovita
1 year ago
I remember a practice question where depreciation was mentioned, but I can't recall if it directly affects cash flow negatively.
CO
Cory
1 year ago
I think more inventory could tie up cash, but I'm not sure if it always has a negative impact.
TE
Tequila
1 year ago
I've got a good strategy here. I'll eliminate the options that improve cash flow and focus on the ones that would decrease it, like more inventory and supplier shortening their payment period.
AL
Alyce
1 year ago
I'm a bit confused. Wouldn't more inventory and depreciation of fixed assets also negatively impact cash flow? I'll need to double-check my understanding.
HE
Heike
1 year ago
Okay, I think I've got it. Increasing revenue and customers paying immediately would both improve cash flow, so those can't be the right answers.
FR
France
1 year ago
Hmm, I'm not sure about this one. I'll need to think through how each of these options affects cash flow.
GE
Geoffrey
1 year ago
This one seems pretty straightforward. I'll focus on the factors that negatively impact cash flow.
DE
Detra
2 years ago
This is a real head-scratcher. I feel like I'm trying to balance the books of Schrödinger's company here.
TA
Tammy
2 years ago
I bet the answer involves the classic 'cash is king' principle. Let's see what the other candidates come up with.
HU
Huey
2 years ago
B) More inventory
CO
Coleen
2 years ago
A) Increasing revenue
TO
Tonette
2 years ago
B) More inventory
NO
Noah
2 years ago
A) Increasing revenue
BR
Brice
2 years ago
But what about D and E? If suppliers shorten their payment period and customers pay immediately, wouldn't that improve cash flow?
SA
Samira
2 years ago
Wait, immediate payment from cusSamiraers is a bad thing? I'm so confused, this question is messing with my head!
JU
Julieta
2 years ago
D) Supplier shortens their payment period
LO
Lorrine
2 years ago
C) Depreciation of fixed asset
VA
Val
2 years ago
B) More inventory
JO
Jody
2 years ago
A) Increasing revenue
CA
Candida
2 years ago
Definitely more inventory and depreciation of fixed assets - those are cash outflows. The other options seem a bit tricky.
ED
Edna
2 years ago
Hmm, increasing revenue should be a good thing for cash flow, right? I'm going to have to think this one through.
IL
Ilda
2 years ago
Yes, increasing revenue is generally a positive for cash flow, but it's important to consider other factors as well.
ME
Mee
2 years ago
Depreciation of fixed asset and supplier shortening their payment period
DA
Daniel
2 years ago
More inventory and depreciation of fixed asset can negatively impact cash flow.
MA
Maryann
2 years ago
Increasing revenue and customers agreeing to pay immediately are both good for cash flow.
LA
Larae
2 years ago
Supplier shortening their payment period and more inventory
DE
Denny
2 years ago
More inventory and depreciation of fixed asset
LA
Laila
2 years ago
Increasing revenue and customers agreeing to pay immediately
DA
Dannie
2 years ago
I agree with Carmen. More inventory ties up cash and depreciation reduces the value of assets.
CA
Carmen
2 years ago
I think B and C always impact negatively on cash flow.