In the statement, "Cogswell Cola needed to purchase additional inventory of plastic bottles to...

Question:

In the statement, "Cogswell Cola needed to purchase additional inventory of plastic bottles to launch its Pulsar Cola. This increase in inventory represents a positive cash flow associated with the project."; would changing "increase" to "decrease" result in the statement being true?

Cash flow:

The movement of cash inside or outside the organization in order to carry out the operating activities is known as cash flow. Cash inflows refer to the increase in the cash amount and outflows refer to the decrease in the cash amount.

Answer and Explanation:

The statement is false. Purchases result in the outflow of cash, which leads to the increase in inventory level and decreases the cash with the company. Therefore, the positive cash flow is not associated with the increase in inventory.


Learn more about this topic:

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Using the Statement of Cash Flows for Decision Making

from Accounting 101: Financial Accounting

Chapter 12 / Lesson 5
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