The partial operating activities section of the statement of cash flows for a company reported the following data ($000): Net income $1,950 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 375 Changes in operating assets and liabilities: Accounts receivable 94 Inventories (75) Accounts payable (25) Had the company used a direct method presentation, would the reported amounts for cash received from customers and cash paid to suppliers be higher or lower than the reported amounts for net sales and cost of goods sold, respectively?
net sales lower costs of goods sold higher ?
cash received > sales cash paid > COGS If change in AR is a positive (94) that means AR declined => source of cash. Besides cash for new sales, the firm got cash from customers paying off old bills => cash received > sales If inventory change is a negative (-75) that means inventory value increased => cash outflow. The firm paid for producing more units than they actually sold during the period => cash paid > COGS Please correct me if I am wrong