Asked by lizzy rybarczyk on Jul 01, 2024

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Which of the following will not be affected by a change in a firm's credit policy?

A) Gross profit.
B) Inventory.
C) Cash flows.
D) Current assets.
E) Net working capital.

Gross Profit

The difference between revenue and the cost of goods sold before accounting for certain other costs.

Net Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term liquidity of a business.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the operating cycle of the business, whichever is longer.

  • Comprehend how modifications in credit policy affect accounts receivable and the volume of sales.
  • Understand the significance and techniques involved in receivables management, and its impact on cash flow.
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AC
Atlas Cloud6 days ago
Final Answer :
A
Explanation :
Gross profit is determined by sales and the cost of goods sold, which are not directly affected by changes in a firm's credit policy. Credit policy changes typically impact the collection period, bad debt expenses, and possibly sales volume, but not the gross profit margin itself.