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

A. an increase in inventory

B. a decrease in accounts payable

C. preferred dividends declared and paid a

D. decrease in accounts receivable

Question

Business

Marco Conner

9 June, 07:47

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

A. an increase in inventory

B. a decrease in accounts payable

C. preferred dividends declared and paid a

D. decrease in accounts receivable

+2

Answers (1)

Know the Answer?

Daniella Crawford · Answer 1

It is decrease in accounts receivable (D)

Explanation:

An Increase in Inventory : the effect of this transaction will reduce the cash position of the company because more cash is being tied down as inventory at a cost.

A decrease in accounts payable : Here, more cash is being paid to off-set liability owed to suppliers and this will reduce company's cash position.

Preferred dividends declared and paid : This is an outflow of cash paid to equity investors as a return on their investment which will impact negatively on the company cash position.

Decrease in accounts receivable : This is an inflow of cash from the settlement of trade receivable owed by our customers which will impact positively on our cash position.

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?A. an increase in inventoryB. a decrease in accounts payableC. preferred dividends declared and paid aD. decrease in accounts receivable

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

A. an increase in inventory

B. a decrease in accounts payable

C. preferred dividends declared and paid a

D. decrease in accounts receivable