When a product is sold on credit, the company will report an increase in:

When a product is sold on credit, the revenue from that sale is recognized at the point of sale, as per the accrual accounting principle. This means that the company records the revenue earned from the transaction, even though cash has not yet been received. As a result, profit will increase because it reflects all revenues earned during the accounting period, regardless of cash transactions.

However, cash flow is only affected when cash is actually received. Since the sale was made on credit, there is no immediate impact on cash flow at the time of the sale. This scenario leads to an increase in profit, as the revenue is recorded, but does not result in an increase in cash flow until the receivable is collected.

Thus, the response that correctly captures this accounting principle is the one indicating an increase in profit but not in cash flow.