Which of the following changes is considered a source of cash when preparing a statement of cash flow?

An increase in property, plant, and equipment

A decrease in accounts payable

A decrease in inventories

An increase in accounts receivable

A decrease in accrued wages

Expert Solution

Option 3 - Decrease in Inventories

Option 3 is correct because Decrease in Inventories means that we have purchased lesser stock resulting in a positive impact on cash flows during the period.

Below are wrong because:

Option 1 - An increase in property, plant & equipment means that we have purchased which is an outflow of cash and not a source or inflow of cash.

Option 2 -A decrease in accounts payable means that we have paid amount due over the period resulting in an outflow of cash.

Option 4 - An increase in accounts receivable means that we have yet to receive amount from customers resulting in a negative impact on cash.

Option 5 -A decrease in accrued wages means that we have paid outstanding wages during the period resulting in cash outflow.

ekkarill92 answered 2 years ago

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