Which one of the following is consistent with a company recording a large operating income but having a net cash outflow from operations?

Question

Quizplus · Accepted Answer

An increase in accounts receivable and inventory would mean that the company has made sales and purchased inventory, respectively, but has not yet received cash for the sales or paid for the inventory. This would result in a net cash outflow from operations, despite a large operating income. Option A is incorrect because depreciation is a non-cash expense and would not affect net cash flow. Option C is incorrect because an increase in accounts payable would actually result in a net cash inflow from operations. Option D is also incorrect because the acquisition of new plant assets for cash would result in a cash outflow from investing activities, not operating activities.

Which One of the Following Is Consistent with a Company