Which of the following is/are true?
I. An increase in inventories has a positive impact on cash flows.
II. An increase in receivables has a positive impact on cash flows.
III. Deferred taxes increase current cash balance.
IV. Utilization of tax loss carry-forwards has a positive impact on cash flows.
Click on the arrows to vote for the correct answer
A. B. C. D.A
An increase in inventories implies cash was spent to obtain more goods than were sold. An increase in receivables implies part of the sales were made on credit, not a cash basis. Both of these have a negative impact on cash flows. Deferring taxes implies some of the cash expense was delayed into the future, increasing the current cash balance. Utilization of tax loss carry-forwards implies a reduction in the taxable income by the amount of the carry-forward. This reduces cash expense on taxes.