Problem

Interpreting the Effect of Changes in Inventories and Accounts Payable on Cash Flow from O...

Interpreting the Effect of Changes in Inventories and Accounts Payable on Cash Flow from Operations

First Team Sports, Inc., is engaged in the manufacture (through independent contractors) and distri­bution of in-line roller skates, ice skates, street hockey equipment, and related accessory products. Its recent annual report included the following on its balance sheet:

CONSOLIDATED BALANCE SHEETS

 

Current Year

Previous Year

Inventory (Note 3)

22,813,850

20,838,171

Trade accounts payable

9,462,883

9,015,376

Required:

Explain the effects of the changes in inventory and trade accounts payable on cash flow from operat­ing activities for the current year.

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