payable accounts

Accounts payable are short-term contributions made by businesses to their creditors. The liability is accrued as of the corporation purchases necessary goods and services without the need of signing a promissory note (Petroons et al., 2014). Check payable clearly reflects a lingering responsibility from a previous financial transaction. Paying off such debt, on the other hand, reduces surplus cash as well as the accounts payable result. This is one of the most critical factors that financial institutions weigh when making comparable commitments.
Accounts payable rose by $46,232 in Smith's case from 2013 to 2014. A growth in the accounts payable may occur due to different reasons such as the acquisition of inventory and new purchases. One implication of this increase is that the organization lacks sufficient cash-flow to cover its purchases. Also, massive debts to fully owned assets may be an indication that the company does not own much of what it regards as assets including the goods for sale. Large accounts payable increases the possibility of the company’s inventory being repossessed in case of delay or failure to reimburse (Diamond & He, 2014).
The increase in accounts payable is not always a bad sign. The debt may be an indication that the business is in the growth stage. Companies in some areas require considerably more debt to establish than others. For example, technology businesses involve long research and development cycles, which pile up a lot of debt before the company starts making considerable revenue. Therefore, assuming Bob Smith is in its early stages, the increase in accounts payable is a good sign for cash. However, the accounts payable alone is not enough evidence to persuade the bank. Other considerations including the company’s wages payable, long-term debt, inventory, and accounts receivable are equally important.
 
References
Diamond, D. W., & He, Z. (2014). A theory of debt maturity: the long and short of debt overhang. The Journal of Finance, 69(2), 719-762.
Petroons, J., Hanan, C. C., Bailey, A. G., Gupta, S. D., Mellyn, K. L., Saal, M., ... & Mondschein, C. (2014). U.S. Patent No. 8,712,887. Washington, DC: U.S. Patent and Trademark Office.