CFA Level I · CFA Level I Exam · Analyzing Statements of Cash Flows I
A company reports revenue of 840,000, and accounts receivable rose from 120,000 to 150,000 during the year. Cost of goods sold was 500,000, inventory fell from 90,000 to 70,000, and accounts payable rose from 60,000 to 75,000. Cash paid to suppliers is closest to:
Cash paid to suppliers is about 465,000. Purchases equal cost of goods sold of 500,000 less the 20,000 inventory decrease, giving 480,000. Payables rose by 15,000, meaning that amount was not paid in cash, so cash paid is 465,000.
- A465,000Correct
- B485,000
- C535,000
Explanation
Purchases = COGS + change in inventory = 500,000 - 20,000 = 480,000. Cash paid to suppliers = purchases - increase in payables = 480,000 - 15,000 = 465,000. Using 485,000 ignores the payable change; 535,000 gets the signs of both adjustments wrong.
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