CFA Level I · CFA Level I Exam · Analyzing Statements of Cash Flows I
Harlow Ltd reported cost of goods sold of 600. Inventory increased from 80 to 110, and accounts payable increased from 50 to 65. Cash paid to suppliers is closest to:
Cash paid to suppliers is about 615. Purchases equal cost of goods sold plus the 30 inventory increase, giving 630. Because payables rose by 15, part of the purchases was not yet paid in cash, so cash paid is 630 minus 15.
- A585
- B615Correct
- C645
Explanation
Purchases = COGS + increase in inventory = 600 + 30 = 630. Cash paid to suppliers = purchases - increase in payables = 630 - 15 = 615. Ignoring payables gives 630 is not an option; adding the payable increase gives 645, and ignoring the inventory change gives 585.
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