<p>Hi, We are studing the cash flow statments. There is a problem that I am faci

Question

<p>Hi, We are studing the cash flow statments. There is a problem that I am facing on every question related to this topic. There is no question I can post. I just need explaination on why we subtract the "decrease in accounts payable" and add "decrease in inventory" to the net income for the operating activites?&#160;We are required to use the&#160;indirect method. I know what&#160;is the difference between operating, investing, and financing. I am just confused about the addition and subtraction for the operating activites. Thank you and I appreciate your help. &#160;</p>

Explanation / Answer

see its simple, we add the decrease in inventory as the decreased amount increases our net income in terms of either cash flow or investment for further benefit. its like a bond. we subtract the decrease in accounts payable as this money is already spent for fulfilling payments. its like a debt clearance. I hope u understood PLEASE RATE

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