What is the cash effect of the change in inventory on

Assignment Help Financial Accounting

Reference no: EM133378721

Question:

1) What is the cash effect of the change in inventory on operating cash flows in Year 1?

2) What is the cash effect of the change in accounts receivable on operating cash flows in Year 3?

• Imagine Ultimate Corp. spends $100 in year one to make widgets

• The widgets are sold on credit for $125 in year two.

• The receivable is collected in year three.

Year 1 2 3

Cash flow -$100 $0 $125

Sales $0 $125 $0

COGS $0 $100 $0

Profit $0 $25 $0

Year 1 2 3

Inventory $100 $0 $0

Change in Inventory $100 -$100 $0

Account Receivable $0 $125 $0

Change in AR $0 $125 $-125

Reference no: EM133378721

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