Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 12 - Statement of Cash Flows - Brief Exercises: BE12-4

Answer

Step1: Cash from operations may be lower than reported net income during growth period, is due to cash paid for inventory and the amount expensed as cost of goods sold. Since the company plans increase in sales, the purchase of inventory increases. Step2: During the late maturity phase and during decline phase, the cash from investing often positive.

Work Step by Step

Step1: Therefore, in the growth phase, the company will expense less inventory on an accrual basis than it purchases on a cash basis. Step2: As the company sells off excess assets.
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