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Finance Mock Interview

Question 23 of 32 for our Finance Mock Interview

Finance was updated by on June 13th, 2018. Learn more here.

Question 23 of 32

What happens on the income statement if inventory goes up by $10? Assuming you paid for it with cash.

On the Cash Flow Statement, Inventory is an asset so that decreases your Cash Flow from Operations - it goes down by $10, as does the Net Change in Cash at the bottom. On the Balance Sheet under Assets, Inventory is up by $10 but Cash is down by $10, so the changes cancel out and Assets still equals Liabilities & Shareholders' Equity. There are no changes to the Income Statement. This is a trick question.

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How to Answer: What happens on the income statement if inventory goes up by $10? Assuming you paid for it with cash.

Advice and answer examples written specifically for a Finance job interview.

  • 23. What happens on the income statement if inventory goes up by $10? Assuming you paid for it with cash.

      How to Answer

      On the Cash Flow Statement, Inventory is an asset so that decreases your Cash Flow from Operations - it goes down by $10, as does the Net Change in Cash at the bottom. On the Balance Sheet under Assets, Inventory is up by $10 but Cash is down by $10, so the changes cancel out and Assets still equals Liabilities & Shareholders' Equity. There are no changes to the Income Statement. This is a trick question.

      Written by Bobbi Witt

      Entry Level

      "Nothing. The income statement is not impacted, only the balance sheet and cash flow statements are impacted."

      Written by Bobbi Witt on June 18th, 2018

      Experience

      "The cash flow statement is decreased, since inventory is and asset in the Cash Flow from Operations section. On the balance sheet under the assets, inventory is increased by $10, but cash is decreased by $10. So the changes on the balance sheet cancel out to balance. There are no changes to the income statement."

      Written by Bobbi Witt on June 18th, 2018