FRA - Reading 34 - Understanding Cash Flow Statement: For Question 37 - does anyone know why the answer does not incorporate COGS ($270 million) as part of cash paid to suppliers? The answer only uses Purchases and deducts the Increase in Accounts Payable (ignoring COGS). I may be overlooking something here but any input is much appreciated…Thanks
Purchases = COGS + Increase in Inventory So if you have already been given Purchases, all you need to do is account for accounts payable and that should be it.
anish is right- just think, I paid cash for all these purchases, except for what i put on credit, which is accounts payable. If they didn’t give you purchases, and just gave you COGS & the increase in inventory, then just think: ok, what did I buy- must have been everything I sold (COGS) plus this additional inventory that I have sitting around that I bought but didn’t sell yet. Let me know if that doesn’t make sense