When calculating the net cash flows from operating activities, an increase in accounts receivables needs to be subtracted from the profit figure.

Question

Quizplus · Accepted Answer

An increase in accounts receivables means that customers owe the company more money, which hasn't been received yet. This should not be included in net cash flows from operating activities because it does not represent cash received. Therefore, it needs to be subtracted from the profit figure to reflect the actual cash flow.

When Calculating the Net Cash Flows from Operating Activities, an Increase