A company bought $50,000 of inventory for $20,000 cash, with the balance due to the supplier in...

Question:

A company bought $50,000 of inventory for $20,000 cash, with the balance due to the supplier in 30 days. What is the operating cash flow in this transaction?

Operating cash flow

Operating cash flow refers to the generated cash of the firm from its business operation. It is a significant indicator for the financial health of the company of whether they produce sufficient cash flow to meet its short term obligation

Answer and Explanation:

The operating cash flow in this transaction is -$20,000 since the inventory is paid in cash for $20,000 which is a cash outflow while the remaining the $30,000 is in credit.


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Operating Cash Flow: Definition & Examples

from Finance 101: Principles of Finance

Chapter 10 / Lesson 4
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