In a statement of cash flows (indirect method),an increase in inventories should be presented as
A) a deduction from net income from continuing operations.
B) an inflow and outflow of cash.
C) an addition to net income.
D) an inflow of cash.

Question

Quizplus · Accepted Answer

An increase in inventories represents an investment in the business and thus, it should be deducted from net income when using the indirect method to calculate cash flows from operating activities. Therefore, the correct answer is A.

In a Statement of Cash Flows (Indirect Method),an Increase in Inventories