When preparing the statement of cash flows using the indirect method,an increase in inventories would appear as:
A) a decrease in the operating activities section
B) an increase in the operating activities section
C) a use of cash in the investing activities section
D) a source of cash in the investing activities section

Question

Quizplus · Accepted Answer

An increase in inventories indicates that more cash was used to purchase inventory and less cash was received from customers for sales. This represents a decrease in operating cash flows since the company had to spend more cash in its operations. Therefore, an increase in inventories would appear as a decrease in the operating activities section of the statement of cash flows using the indirect method.

When Preparing the Statement of Cash Flows Using the Indirect