A decrease in inventory will be added to net income when preparing the operating activities section under the indirect method.

Name: A decrease in inventory will be added to net income when preparing the operating activities section under the indirect method.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

When preparing the operating activities section under the indirect method, a decrease in inventory is added back to net income because it means less cash was spent on inventory, which increases cash flow from operations.

A Decrease in Inventory Will Be Added to Net Income