Corporation Corp. reported sales revenue 100$ for current year.AR decrease by 10$, AP increased by 4$. What are the cash collections?
How I have solved this problem - 100+10+4=114$ cash collections. However, in the solution, you don’t have to add increase in AP. Can you explaine me why so?
Thank you!
What page is the problem on? I’ll take a look. I don’t know why it doesn’t add AP.
Although the increase in AP is a source of cash, I think the question is asking for what the company physically collects: it’s not like the company goes to visit the creditor to get $4 and then buy the good/service that generates the payable. That, at least, is my thinking.
Yep, cash collections is the money collected from customers … and for that you just need the Sales and change in AR.
It is page 135, problem - 16, Schweser notes.
For me, this question is really strange … However, I will keep in mind this solution.
Okay. So, instead of this question asking about “cash flow from operations”, it’s just asking for cash collections , actual physical dollar bills you receive.