An increase in working capital would appear on the cash flow statement as a:
A) Financing activity
B) Operating activity
C) Investing activity
D) Debt activity

Question

Quizplus · Accepted Answer

An increase in working capital would affect the operating activities section of the cash flow statement since it relates to the day-to-day operations of the company, such as changes in accounts receivable, inventory, and accounts payable. Financing activities involve raising capital, issuing or retiring debt, and making dividend payments, while investing activities involve the purchase or sale of long-term assets or investments. Working capital changes do not fall into either of these categories. Debt activity involves borrowing or repaying debt, which is a separate transaction from a change in working capital.

An Increase in Working Capital Would Appear on the Cash