When the current assets of a company such as trade receivables or inventory increase during the year, the increase provides additional cash inflow from operating activities.

Question

Quizplus · Accepted Answer

An increase in current assets such as trade receivables or inventory indicates that the company has spent cash to acquire or produce these assets, resulting in a decrease in cash inflow from operating activities. However, a decrease in current assets indicates that the company has collected cash from customers or sold inventory, resulting in an increase in cash inflow from operating activities.

When the Current Assets of a Company Such as Trade