The statement of cash flows for Baldwin Company shows what happens in the Cash a

Question

The statement of cash flows for Baldwin Company shows what happens in the Cash account during the year. It can be seen as a summary of the sources and uses of cash (sources of cash are added, uses of cash are subtracted). Please answer which of the following is true if Baldwin's inventory goes up: Select: 1 It is a use of cash, and will be shown in the investing section as a subtraction. It is a use of cash, and will be shown in the operating section as a subtraction. It is a source of cash, and will be shown in the investing section as an addition. It is a source of cash and will be shown in the operating section as an addition. The statement of cash flows for Baldwin Company shows what happens in the Cash account during the year. It can be seen as a summary of the sources and uses of cash (sources of cash are added, uses of cash are subtracted). Please answer which of the following is true if Baldwin's inventory goes up: Select: 1 It is a use of cash, and will be shown in the investing section as a subtraction. It is a use of cash, and will be shown in the operating section as a subtraction. It is a source of cash, and will be shown in the investing section as an addition. It is a source of cash and will be shown in the operating section as an addition.

Explanation / Answer

An increase in inventory means blocking of funds in inventory which cannot be released unless it is sold. So, an increase in inventory means a cash outflow which is shown under operating activities section of statement of cash flows

So, as per above discussion, option B is the correct option

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