Cash Received from Customers

CFA Level I
#1

Hello,

Why wouldn’t a reduction in inventory be considered cash received from customers?

Thanks in advance.

Question 11

  • Revenue = $85 million
  • Cost of goods sold = $44 million
  • Decrease in inventory = $7 million
  • Increase in accounts payable = $4 million
  • Decrease in accounts receivable = $5 millions

Cash received from customers is closest to:

$90 million.

$80 million.

$73 million.

You Answered Correctly!

Cash received from customers = Revenue + Decrease in accounts receivable

Cash received by the company = 85 + 5 = $90 million

#2

You get cash from customers when:

  • They pay you cash for sales this period
  • They pay you cash they owed you for sales last period
  • They pay you cash deposits for sales in future periods

A reduction in inventory is not a cash flow.