Thread: What would be the probable effect on a firm?s cash position of the following events?

1.Rapidly rising sales
2.A delay in the payment of accounts payable
3.A more liberal credit policy on credit sales (to the firm?s customers)
4.Holding larger inventories

effect on a firm?s cash position

All negative.
1. Increased cash outlay to support inventory.
2. Loss of discounts.
3. Decreased cash tied up in AR and or uncollectibles.
4. Slower Turnover. Increased capital tied up.

1. Positive if not all sales are on a credit basis 2. Positive the longer you held back from paying them 3. Negitive as you are increasing the receivables only 4. Negitive as you are tying more dollars up in unsold assets