Finance Mock Interview
Master 32 Finance interview questions covering financial modeling, risk analysis, and valuation.
Question 16 of 32
What effect would an increase in accounts receivable have on the cash flow statement?
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Bobbi Witt is an HR Manager and Senior Level Finance and Accounting Consultant. Her experience includes 9 years at a Fortune 500 company where she held a wide range of financial and management accountabilities.
An increase in accounts receivables shows up as a decrease on the cash flow statement. The opposite is true if accounts receivable decreases. This means that cash was collected during the year, but sales weren't reported in net income. Thus, net income should be increased.
Bobbi Witt is an HR Manager and Senior Level Finance and Accounting Consultant. Her experience includes 9 years at a Fortune 500 company where she held a wide range of financial and management accountabilities.
If the business is using the indirect method, then the cash flow statement will be impacted if AR is increased or decreased. An increase in accounts receivable during the year means that sales were made during the year, but the cash was not collected. This means that the net income includes non-cash sales that must be removed. Thus, an increase in accounts receivables shows up as a decrease on the cash flow statement.
An increase in accounts receivable during the year means that sales were made during the year, but the cash was not collected. This means that the net income includes non-cash sales that must be removed. Thus, an increase in accounts receivables should decreases show up as a decrease on the cash flow statement.
The opposite is true if accounts receivable decreases. This means that cash was collected during the year, but sales weren't reported in net income. Thus, net income should be increased.
Bobbi Witt is an HR Manager and Senior Level Finance and Accounting Consultant. Her experience includes 9 years at a Fortune 500 company where she held a wide range of financial and management accountabilities.
If the business is using the indirect method, then the cash flow statement will be impacted if AR is increased or decreased. The cash flow statement shows how cash changed from the end of last year to the end of this year. In order to calculate this, we need a starting point.
The general rule of thumb is that assets are indirectly related to their change in balances whereas liabilities are directly related to their change in balances.
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