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Changes from the Cash Flow Statement (Indirect Method) A recent statement of cash flows for Colgate-Palmolive reporting the following information (dollars in millions): Operating Activities Net income $1,957.20 Depreciation 347.6 Cash effect of changes in Receivables 69.8 Inventories 134.7 Other current assets 31 Payables 125.2 Other 43.8 Net cash provided by operations $2,238.30 Based on the information reported on the statement of cash flows for Colgate-Palmolive, determine whether the following accounts increased or decreased during the period: Receivables, Inventories, Other Current Assets and Payables.

Respuesta :

Answer:

a. Receivables increased during the period.

b. Inventories increased during the period.

c. Other Current Assets increased during the period.

d. Payables increased during the period.

Explanation:

Given:

Colgate-Palmolive

Cash Flow Statement (Operating Section Only)

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million  

Operating Activities Net income                        1,957.20

Depreciation                                                           347.60

Cash effect of changes in Receivables               –69.80

Inventories                                                            –134.70

Other current assets                                              –31.00

Payables                                                                 125.20

Other                                                                        43.80  

Net cash provided by operations                   2,238.30  

Therefore, we have:

a. Receivables

The negative amount of $69.80 millions indicates that Receivables increased during the period. This is because, as Receivables increase without paying cash to the business, less cash is available for the business. This makes the increase to be negative in the Cash Flow Statement.

b. Inventories

The negative amount of $134.70 millions indicates that  Inventories increased during the period. This is because, as  Inventories increase and held in the store without being sold for cash, less cash is available for the business. This makes the increase to be negative in the Cash Flow Statement.

c. Other Current Assets

The negative amount of $31 millions indicates that Other Current Assets increased during the period. This is because, as Other Current Assets increase and without being converted to cash, less cash is available for the business. This makes the increase to be negative in the Cash Flow Statement.

d. Payables

The positive amount of $15.20 millions indicates that Payables increased during the period. This is because, as Payables increase and without cash being paid, more cash is available for the business. This makes the increase to be positive in the Cash Flow Statement.

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