If net income is 100 and depreciation is 20, what is CFO before working-capital changes?
QUESTION
Identify the cash flow effect of an increase in inventory under the indirect method.
QUESTION
Identify the cash flow effect of an increase in accounts payable under the indirect method.
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ANSWER
Increase CFO (add the increase in A/P). In the indirect method, growing A/P indicates expenses accrued but unpaid, adding back to net income for cash flow adjustment.