Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Types of Receivables

Financial Accounting

7. Receivables and Investments

Types of Receivables

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Multiple Choice

Which of the following is a long-term consequence of making late payments on your bills?

An increase in the interest income earned on receivables.

A reduction in the amount of accounts receivable reported.

A decrease in your credit score, making it harder to obtain future credit.

An immediate increase in your cash balance.

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Verified step by step guidance

Understand the concept of credit score: A credit score is a numerical representation of an individual's creditworthiness, based on their credit history. Late payments negatively impact this score.

Recognize the long-term consequences of late payments: Late payments signal to lenders that the individual may be a higher risk, which can lead to a decrease in their credit score.

Analyze the options provided: Evaluate each option to determine its relevance to the long-term impact of late payments. For example, late payments do not directly increase interest income or cash balance, nor do they reduce accounts receivable in this context.

Identify the correct consequence: Late payments result in a decrease in credit score, which makes it harder to obtain future credit. This is the long-term impact described in the problem.

Conclude the reasoning: Late payments affect financial credibility and borrowing ability, emphasizing the importance of timely bill payments to maintain a healthy credit score.