Which of these is a reason why a cash flow statement could show a negative cash flow from operating activities even though the statement of comprehensive income showed a profit?
A) an increase in the amount of inventory held
B) an increase in depreciation charged
C) a decrease in the amount owing by debtors
D) an increase in the amount owing by creditors

Question

Quizplus · Accepted Answer

An increase in inventory held means that the company has spent cash to acquire more inventory, which does not immediately translate into income until the inventory is sold. This can result in a negative cash flow from operating activities even if the company is showing a profit on the statement of comprehensive income.

Which of These Is a Reason Why a Cash Flow