A business has made a profit of £120, its opening inventory was £30, it purchases were £150 and it closing inventory was £50. All transactions were for cash. What was the total cash inflow for the period?

Question

Quizplus · Accepted Answer

The total cash inflow includes the profit made (£120) plus the cash spent on purchases (£150), totaling £270. However, the correct calculation for cash inflow in this context should actually consider sales rather than profit directly. The error in explanation led to an incorrect conclusion. The correct approach to find cash inflow is to calculate sales using the given information: Opening Inventory + Purchases - Closing Inventory = Cost of Goods Sold (COGS); COGS + Profit = Sales. Sales represent the cash inflow from customers, which is the actual figure we seek. The initial explanation mistakenly added profit and purchases, which does not accurately represent cash inflow.

A Business Has Made a Profit of £120, Its Opening