Asked by Libby Craig on Jun 12, 2024
Verified
During the year, The Train Stop decreased its accounts receivable by $60, increased its inventory by $130, and decreased its accounts payable by $20. For these three accounts, the firm has a net:
A) $90 use of cash.
B) $50 use of cash.
C) $170 use of cash.
D) $90 source of cash.
E) $50 source of cash.
Accounts Payable
The total sum a business must pay to its suppliers or creditors for products and services obtained on credit.
Inventory
Goods and materials that a business holds for the ultimate goal of resale, production, or utilization in manufacturing.
- Understand cash flow changes from changes in accounts receivable, inventory, and accounts payable.
Verified Answer
HW
Haaris WastiJun 16, 2024
Final Answer :
A
Explanation :
Decreasing accounts receivable means cash is collected, which is a source of cash (+$60). Increasing inventory uses cash (-$130). Decreasing accounts payable means cash is paid out, which is a use of cash (-$20). The net effect is a $90 use of cash ($60 - $130 - $20 = -$90).
Learning Objectives
- Understand cash flow changes from changes in accounts receivable, inventory, and accounts payable.