When the current assets of a company such as trade receivables or inventory increase during the year, the increase provides additional cash inﬂow from operating activities.

Question

Quizplus · Accepted Answer

An increase in current assets such as trade receivables or inventory indicates that the company has used cash to purchase or produce these assets, and therefore it would be a cash outflow from operating activities. It is only when these assets decrease that it would result in additional cash inflow from operating activities.

When the Current Assets of a Company Such as Trade