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Port West Trading Limited 2014 2015 2016 Sales 1,400,000 1,500,000 1,720,000 Cost of goods sold 1,316,000 1,450,000 1,680,000 84,000 50,000 40,000 Inventory 140,000 180,000 210,000

Port West Trading Limited

2014

2015

2016

Sales

1,400,000

1,500,000

1,720,000

Cost of goods sold

1,316,000

1,450,000

1,680,000

84,000

50,000

40,000

Inventory

140,000

180,000

210,000

Accounts receivable

100,000

140,000

200,000

Cash

10,000

0

0

Current assets

250,000

320,000

410,000

Accounts payable

79,850

85,000

90,000

Short term debt

0

34,850

79,850

Provisions- returns/refunds

1,400

1,500

1,720

Current liabilities

81,250

121,350

171,570

Assume you are the auditor of Port West Trading Limited. Management provides you with a series of explanations for the 2016 financial results. Which of the following reasons is valid for poor operating cash flow?

Select one:

a.

A decrease in accounts receivable.

b.

An increase in accounts payable.

c.

A decrease in raw material inventory.

d.

An increase in finished goods inventory.

Clear my choice

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