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belka [17]
2 years ago
14

Explain why a $ 50,000 increase in inventory during the year must be included in developing cash flows from operating activities

under both the direct and indirect methods.
Business
1 answer:
Simora [160]2 years ago
5 0

Explain why a $50,000 increase in inventory during the year must be included in computing cash flows from operating activities under both the direct and indirect methods. The $50,000 increase in inventory must be used in the statement of cash flow calculations because it increases the outflow of cash (all else equal).

An increase in the company's inventory indicates that the company has purchased more goods than it has sold. It means an additional cash outflow as cash must be used to purchase additional consumables. Cash outflows have a negative or unfavorable impact on a company's cash position.

Therefore, as inventories increase, the company will have to spend money to buy them (cash outflow). On the other hand, the decrease in inventory will be cash in for the amount sold. We arrive at the following rule: Inventory Increase => Cash Outflow (Negative)

An indirect way to create a cash flow statement is the change in the amount of cash due to operating activities in the account on the balance sheet. and adjust the net profit for the year.

Learn more about inventory here;

brainly.com/question/24868116

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6 0
2 years ago
g Crowding out may occur when fiscal policy involves Question 28 options: A) either increases in government purchases or tax cut
aniked [119]

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Explanation:

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4 0
2 years ago
Suppose someone believes that if a per-unit tax is placed on the producers of good Y, the consumers of good Y will end up paying
Alex_Xolod [135]

Answer:

The correct answer is option (B)  perfectly inelastic

Explanation:

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4 0
2 years ago
In a balanced balance sheet, if liabilities are $2,000 and owner’s equity is $3,300, what must assets be ____?
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3 0
2 years ago
You were able to purchase two tickets to an upcoming concert for $100 apiece when the concert was first announced three months a
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3 years ago
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