The Commercial Division of Tidewater Inc. provided the following information on its cash flow from operations: Net

Question:

The Commercial Division of Tidewater Inc. provided the following information on its cash flow from operations:

Net income ......................................$ 945,000

Increase in accounts receivable ............(1,134,000)

Increase in inventory ........................(1,260,000)

Decrease in accounts payable ................(189,000)

Depreciation .....................................210,000

Cash flow from operating activities .....$(1,428,000)

The manager of the Commercial Division provided the accompanying memo with this report:

I am pleased to report that we had earnings of $945,000 over the last period. This resulted in a return on invested capital of 8%, which is near our targets for this division. I have been aggressive in building the revenue volume in the division. As a result, I am happy to report that we have increased the number of new credit card customers as a result of an aggressive marketing campaign. In addition, we have found some excellent merchandise opportunities.

Some of our suppliers have made some of their apparel merchandise available at a deep discount. We have purchased as much of these goods as possible in order to improve profitability. I'm also happy to report that our vendor payment problems have improved. We are nearly caught up on our overdue payables balances.

Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...