According to this Cash Flow Statement - I am to determine how inventory is doing?

I am at a lose. Any help would be appreciated - Thanks





Cash flows from Operating Activities 2011 2010
Net Income (Loss) $2456.00 $3467.00
Depreciation $2101.00 $960.00
Extrodinary gains/losses/writeoffs $0 $0
Accounts Payable $422.00 $383.00
Inventory ($3540.00) $2,353.00
Accounts Receivable ($164.00) ($316.00)
Net Cash from Operations $1275.00 $6081.00

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Originally Posted by GailKT

According to this Cash Flow Statement - I am to determine how inventory is doing?

I am at a lose. Any help would be appreciated - Thanks

Cash flows from Operating Activities 2011 2010
Net Income (Loss) $2456.00 $3467.00
Depreciation $2101.00 $960.00
Extrodinary gains/losses/writeoffs $0 $0
Accounts Payable $422.00 $383.00
Inventory ($3540.00) $2,353.00
Accounts Receivable ($164.00) ($316.00)
Net Cash from Operations $1275.00 $6081.00

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Inventory has increased in 2011 and decreased on 2010.

The calculation of net cash flow from operations in 2010 is incorrect, assuming that the figures mentioned have been correctly stated.

It appears that the amount of accounts payable has been treated as a decrease rather than an increase. In 2011, it has been treated as an increase

Quote:

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Originally Posted by rehmanvohra

The calculation of net cash flow from operations in 2010 is incorrect, assuming that the figures mentioned have been correctly stated.

It appears that the amount of accounts payable has been treated as a decrease rather than an increase. In 2011, it has been treated as an increase

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This is true. When things go the wrong direction, the mistake will double itself. It's 766 off, divided in half is 383, which is the amount of the payables. Meaning payables is the "wrong direction." Since the total is off, I'm suspecting that may be a typo, otherwise it makes no sense that someone totalled it that exact amount off by coincidence?

GailKT, I'm suspecting the point of the question is to see if you understand how the adjustments on the cash flow and the balances on the balance sheet relate.

For current assets, you do the opposite on the cash flow adjustment to the change in balance. That is, it the balance increases you subtract on the cash flow; it the balance decreases, you add on the cash flow.

If you get that, then you can look at 2011, see that it is subtracted, and then know that means inventory increased from 2010 to 2011.