In calculating cash flows from operating activities using the indirect method, an increase in inventories is
A) added to net income.
B) deducted from net income.
C) ignored because it does not affect cash.
D) not reported on a statement of cash flows.

Question

Quizplus · Accepted Answer

An increase in inventories represents a use of cash, as more money was spent to acquire inventory. Therefore, it is deducted from net income to calculate cash flows from operating activities using the indirect method.

In Calculating Cash Flows from Operating Activities Using the Indirect