CAF-1 · Chapter 14 · Question 8 of 15
In the statement of cash flows, how should an increase in inventory during the year be treated when calculating operating cash flows via the indirect method?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Deducted from profit before tax.
Explanation
An increase in an operating asset (like inventory) represents cash tied up in the business, so it is treated as a cash outflow and deducted from profit before tax.
More IAS 7 Statement of Cash Flows MCQs
- Q10According to IAS 7, what is the classification for cash payments to acquire property, plant, and equipment?
- Q11How are interest paid and interest received typically classified in a statement of cash flows?
- Q12Which of the following is a primary advantage of providing a statement of cash flows?
- Q13A company pays a dividend to its shareholders. Under IAS 7, this cash outflow is typically classified as:
- Q14Under the indirect method, how is depreciation expense treated when calculating cash generated from operations?