Which of the following increases free cash flows to the firm’s invested capital? a

Let us evaluate the options one by one

1) Decrease in gross margins: Will reduce the overall profitability of the firm & hence reduce the cash flows as well as the value of the firm

2) Decrease in accounts payable: This implies that cash has been paid out to the vendors and hence the overall cash flow has reduced

3) Decrease in accounts receivable: This implies that the outstanding money owed to the firm by the vendors has been paid to the firm, which will mean an increase in cash flows and hence increase in value

4) Increase in PPE: This means that the firm has paid out money to acquire assets and hence the cash flow has reduced.

Hence the correct option is Option C: A decrease in accounts receivables