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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

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Answers (1)
  1. 29 June, 17:21
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    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.
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