An increase in inventory is subtracted from net income when determining cash flow from operating activities.

Name: An increase in inventory is subtracted from net income when determining cash flow from operating activities.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

An increase in inventory represents cash that has been used to purchase goods that have not yet been sold, which is a use of cash and therefore subtracted from net income in the calculation of cash flow from operating activities in the indirect method.

An Increase in Inventory Is Subtracted from Net Income When