Which of these is a reason why a statement of cash flows 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)A decrease in the amount owing by debtors.
C)An increase in the amount owing by creditors.
D)An increase in depreciation charged.

Question

Quizplus · Accepted Answer

An increase in the amount of inventory held can lead to a negative cash flow from operating activities because it represents cash tied up in inventory that has not yet been sold, despite the company showing a profit on the statement of comprehensive income. This does not immediately affect net income but reduces cash available from operations.

Which of These Is a Reason Why a Statement of Cash