In preparing the statement of cash flows by the indirect method,an increase in inventory would be added to net income.

Question

Quizplus · Accepted Answer

In preparing the statement of cash flows by the indirect method, an increase in inventory would be subtracted from net income. This is because an increase in inventory means that more cash was used to purchase inventory and less cash was available for other activities, such as paying dividends or investing in new projects. Therefore, an increase in inventory is considered a use of cash and is subtracted from net income in the operating section of the cash flow statement.

In Preparing the Statement of Cash Flows by the Indirect