During the year, Al's Tools decreased its accounts receivable by $160, increased its inventory by $115, and decreased its accounts payable by $70. How did these three accounts affect the sources of uses of cash by the firm?
A) Net source of cash of $120
B) Net source of cash of $205
C) Net source of cash of $45
D) Net use of cash of $115
E) Net use of cash of $25

Question

Quizplus · Accepted Answer

Decreasing accounts receivable by $160 is a source of cash, increasing inventory by $115 is a use of cash, and decreasing accounts payable by $70 is a use of cash. The net effect is $160 - $115 - $70 = -$25, which is a net use of cash of $25.

During the Year, Al's Tools Decreased Its Accounts Receivable by $160