An increase in prepaid expenses of $8,000 for the year increases cash flow from operating activities by $8,000.

Name: An increase in prepaid expenses of $8,000 for the year increases cash flow from operating activities by $8,000.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

An increase in prepaid expenses is considered a non-cash expense and is added back to the net income when calculating cash flow from operating activities using the indirect method. Therefore, it does not increase cash flow from operating activities directly.

An Increase in Prepaid Expenses of $8,000 for the Year