direct and indirect cash flow method

Your question worried me! I thought maybe the ACCA had taken direct method out of the syllabus without telling me! So, do you know what I did? I went to the ACCA website and actually checked the syllabus for myself. This is what I found:

“C FINANCIAL STATEMENTS

1. Statements of Cash flows

a) Prepare a statement of cash flows for a single
entity (not a group) in accordance with relevant
accounting standards using the direct and the
indirect method”

Did you not think of checking the ACCA site?

i am struggling to understand how to interpret the following ratio:

inventory turnover days: calculated as (inventory/cos) *365

according to my understanding, this should be as low as possible because a higher number would mean that cash is tied too much in inventory which is not good for liquidity.

however in the link below, examiner said this should generally be higher the better

https://www.accaglobal.com/uk/en/student/acca-qual-student-journey/qual-resource/acca-qualification/f7/technical-articles/appraisal-questions.html

Anas, it’s not acceptable to cite the examiner’s name – it’s now taken to be confidential. I have deleted your original post, copied and pasted it but deleted the examiner’s name.

In answer to the question replicated above, I cannot understand your confusion. YES, direct method IS in the syllabus. the examiner (whatever his / her name may be) has never asked students to prepare a cash flow using the direct method – look at past exam questions in a reputable revision kit / exam kit – but you MAY (unlikely) be asked for a 5 mark chat about the direct method

A business only makes a profit when it sells inventory. No profit is achieved when a receivable settles their debt, nor is profit achieved on the occasion of the purchase of more inventory.

Imagine a circle with three points on the circumference:- inventory, receivables and cash.

Only when moving round the arc from inventory to receivables is a profit made.

The more times a company can move round that arc, the more opportunities it has to generate profits.

So, as a general principle, the bigger the multiple of the inventory turnover “ratio”, the better

Enough? Or do you want more?