Walker Inc. uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: The change in Inventory will be shown as a negative cash flow in the adjustments to Net Income.

Question

Walker Inc. uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet:  The change in Inventory will be shown as a negative cash flow in the adjustments to Net Income.

Quizplus · Accepted Answer

An increase in inventory represents a use of cash, so it will be shown as a negative adjustment to net income in the operating activities section of the statement of cash flows.