Which of the following adjustments net income is NOT correct if you want to calculate cash flow from operating activities?
A)Add back depreciation
B)Add increases in accounts payable
C)Add increases in accounts receivable
D)Deduct increases in inventory

Question

Quizplus · Accepted Answer

Adding increases in accounts receivable is incorrect because it means that the company sold products or services on credit but hasn't received cash yet, thus it does not increase cash flow.

Which of the Following Adjustments Net Income Is NOT Correct