CFA Level I · CFA Level I Exam · Analyzing Statements of Cash Flows I
Tavin Corp's cost of goods sold was 540,000. Inventory increased by 25,000 and accounts payable increased by 15,000. Cash paid to suppliers is closest to:
Cash paid to suppliers is about 550,000. Purchases equal cost of goods sold plus the 25,000 inventory increase, giving 565,000, and the 15,000 rise in payables means that much was not yet paid in cash, leaving 550,000.
- A500,000
- B550,000Correct
- C580,000
Explanation
Purchases = COGS + increase in inventory = 540,000 + 25,000 = 565,000. Cash paid = purchases - increase in payables = 565,000 - 15,000 = 550,000. Check: payables rise 15,000 because 15,000 of purchases were unpaid, so cash is 550,000.
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