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An upcoming project involves an up-front (year 0) increase in inventories of $767. In your cash...

An upcoming project involves an up-front (year 0) increase in inventories of $767. In your cash flow table, the cash flow impact of that change in year 0 only should be $__________.

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Answer #1

Solution:-

Increase in up-front (year 0) increase in inventories of $ 767 will reduce its operating cash flows by $767. This is due to blockage of money in Inventory.

Increase in working capital always results in decrease in operating cash flows.

Why it is impacting operating cash flows- Reason is as Inventory is related to business activities or it is directly related with business operations, therefore it is reducing cash flow from operating activities only instead of Investing activities or Financing activities.   

If you have any query related to question then feel free to ask me in a comment. Thanks.

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