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- PositiveThe effect of a decrease in inventory on cash flow is positive123. This is because a decrease in inventory means that the inventory has been sold, resulting in cash inflow123. On the other hand, an increase in inventory will appear as a negative amount in the cashflow statement, indicating a cash outlay2. Poor inventory management that expands the level of inventories on the balance sheet at any given time, meaning inventory is not being sold, is a use of cash that decreases cash flows from operations4.Learn more:✕This summary was generated using AI based on multiple online sources. To view the original source information, use the "Learn more" links.On the other hand, the decrease of inventory will make cash inflow as we have sold them. We come up with the following rule: Inventory increase => Cash Outflow (negative) Inventory decrease => Cash Inflow (positive)accountinginside.com/inventory-on-cash-flow-state…An increase in inventory stock will appear as a negative amount in the cashflow statement, indicating a cash outlay, or that a business has purchased more goods than it has sold. If, on the other hand, inventory stock has decreased, the reduction in inventory stock would be shown as a positive amount on the cashflow statement.www.unleashedsoftware.com/blog/relationship-cas…An outflow of cash has a negative or unfavorable effect on the company’s cash balance. (A decrease in inventory would be reported as a positive amount, since reducing inventory has a positive effect on the company’s cash balance.)quick-advices.com/what-happens-to-cash-flow-whe…Lower inventory turnover usually indicates less effective inventory management. Poor inventory management expands the level of inventories on the balance sheet at any given time, meaning inventory is not being sold. This is a use of cash that decreases cash flows from operations.www.investopedia.com/ask/answers/033015/what-…
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