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.
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Answer:
$0.5 per share
Explanation:
Preference Share Capital = 1000 shares * $10 = 10,000
Annual Dividend in Total = 10000*5% = $500
Annual Dividend Per Share = $500/1000 = $0.5 per share
<span>Return on equity = 11.28 percent = 11.28/100 = 0.1128
debt-equity ratio =1.03
total asset turnover = 0.87
return on assets = ?
we can find return on assets by using the formula
= return on equity / (1 + debt equity ratio)
= 0.1128 / (1 + 1.03)
= 0.1128 / 2.03
= 0.0556 = 0.0556 x 100 = 5.56%
So, the return on assets is 5.56%</span>
Answer: None of the answers
Explanation:
The options to the question are:
A) The control limits are too tight
(B) The control limits are acceptable
(C) The control limits are too loose
(D) None of the answers.
According to the seven run rule, a process is out of control in a control chart in a situation whereby there are seven consecutive data points that all fall on same side of mean. In such case an adjustment has to be made.
In the scenario in the question, none of the answers will be chosen because there has been a violation of the seven run rule as the answers provided are all incorrect.
