An overstatement of opening inventory will result in an understatement of operating cash flows in the current period.

Question

Quizplus · Accepted Answer

An overstatement of opening inventory would not directly affect operating cash flows since inventory levels primarily impact the cost of goods sold and, consequently, the net income on the income statement, rather than directly affecting cash flows. Operating cash flows are more directly influenced by actual cash transactions.

An Overstatement of Opening Inventory Will Result in an Understatement