Question

29. Please explain why an increase in accounts payable may be perceived positively by investors.

Answer 1

Accounts payable are the bills that are not paid by the company for the services received and are to be paid at the date of settlement. An increase in the accounts payable is good as it increases the cash balance of the company by not paying the bills currently hence, the company could  use those extra amount for running the operating cycle of the company or can invest in the short term fixed income investments to earn more profit until the date of making payment of those accounts payables.

Accounts payables are preferred as they help in making the statement of cash flows of the company positive due to delay in the payment of the bills of the company. A positive statement of cash flows would help in building the good reputation of the company.