What is the effect of increasing accounts payable on cash flow?

Increasing accounts payable results in an increase in cash flow. This occurs because when a company delays payments to its suppliers or creditors, it retains more cash within the business for a longer period. Essentially, the company is using credit from its suppliers, which means it does not need to immediately use available cash to settle its obligations. This additional cash can then be used for various purposes, such as funding operations, investing in opportunities, or paying down other liabilities.

In the context of cash flow statements, an increase in accounts payable is viewed as a source of cash inflow under operating activities. It enhances the company’s liquidity, allowing for greater flexibility in managing financial resources. Understanding this relationship is crucial for analyzing a company's working capital and overall financial health.