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Cash flow
hi,
while making adjustment for working capital changes,
I'm a bit confused with inventory, when inventory decreases why should we add it to operating profit?
Replies (5)
because inventory is a part of operating activies.. as inventory is decreased that means we had selled it so profit will b increased..!!
But what if all sales are on credit
in that case ur debtors will also increases na... if stock decreases....!!! automatically effects will b there in both
Thank you sir.
Dear Prerana,
It represents Sale of Goods, which means increase in cash flow hence we add it to profits.
All the Best.
Regards,
QLI Success Oriented Coaching for CA and CS
www.qli.co.in
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