Cash Paid to Suppliers (Direct Method Statement of Cash Flows)

This video shows how to calculate the cash paid to suppliers for the operating section of the Statement of Cash Flows when a company uses the direct method.

You obtain the cash paid to suppliers by converting the cost of goods sold from the Income Statement to a cash-basis. This is done using the following formula:

Cash Paid to Suppliers = Cost of Goods Sold + Increase in Inventory - Decrease in Inventory + Decrease in Accounts Payable - Increase in Accounts Payable—
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