Walker Corp. uses indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: How will the change in inventory be shown on the statement of cash flows?
A)positive cash flow under the operating activities section
B)negative cash flow under the operating activities section
C)positive cash flow under the financing activities section
D)negative cash flow under the investing activities section

Question

Walker Corp. uses indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet:  How will the change in inventory be shown on the statement of cash flows?
A)positive cash flow under the operating activities section 
B)negative cash flow under the operating activities section 
C)positive cash flow under the financing activities section 
D)negative cash flow under the investing activities section

Quizplus · Accepted Answer

The change in inventory will be shown as a negative cash flow under the operating activities section because an increase in inventory is considered a use of cash in the business, while a decrease in inventory is considered a source of cash.