In a manufacturing business with a credit sales model, which statement is false regarding cash flows?

The statement regarding cash flows that is considered false is that selling the product and collecting cash for credit sales occur simultaneously. In a credit sales model, a company sells products to customers and allows them to pay later, which means that the cash is not received at the same time the sale is made. Instead, revenue from credit sales is recorded as accounts receivable until the customer pays, resulting in cash inflows only when those receivables are collected.

In contrast, cash inflows occur when those receivables are collected, and cash is indeed spent during the process of converting raw materials into finished goods. Additionally, the purchase of raw materials represents a cash outflow as it requires the company to spend cash or incur liabilities before generating a return from sales. Therefore, the simultaneous occurrence of selling products and collecting cash from those sales misrepresents the structure of cash flows in a credit sales scenario.