Which of these factors could cause operating profit to be more than cash flow from operations?

Question

Quizplus · Accepted Answer

Increases in accounts receivable and inventory both imply that some of the revenues or costs recorded in the operating profit have not yet been converted into cash. An increase in accounts receivable indicates that sales have been made but not all have been collected in cash, and an increase in inventory suggests that goods have been produced or purchased but not yet sold, both of which would lead to operating profit being higher than the cash flow from operations.

Which of These Factors Could Cause Operating Profit to Be