Which of the following should be subtracted from net income in calculating net cash flow from operating activities using the indirect method?

a. An increase in inventory

b. A decrease in prepaid expenses

c. A decrease in inventory

d. An increase in accrued expenses payable

Question

Business

Savanah Day

29 June, 16:12

Which of the following should be subtracted from net income in calculating net cash flow from operating activities using the indirect method?

a. An increase in inventory

b. A decrease in prepaid expenses

c. A decrease in inventory

d. An increase in accrued expenses payable

+2

Answers (1)

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Phoenix Ballard · Answer 1

a. An increase in inventory

An increase in inventory is an increase in the working capital which means more cash is being spent on buying inventory, therefore the addition to inventory is a decrease in cash flow when calculating cash flow using an indirect method.

Which of the following should be subtracted from net income in calculating net cash flow from operating activities using the indirect method?a. An increase in inventoryb. A decrease in prepaid expensesc. A decrease in inventoryd. An increase in accrued expenses payable

Which of the following should be subtracted from net income in calculating net cash flow from operating activities using the indirect method?

a. An increase in inventory

b. A decrease in prepaid expenses

c. A decrease in inventory

d. An increase in accrued expenses payable