Final answer:
Incremental cash flows refer to the additional cash flows a company generates from a new project. In the given options, a decrease in net working capital, an increase in taxes, and a decrease in the cost of goods sold are all examples of incremental cash flows, as they represent changes in cash flows attributable to the business decisions.
Step-by-step explanation:
To identify which of the following are examples of incremental cash flow: an increase in accounts receivable, a decrease in net working capital, an increase in taxes, and a decrease in the cost of goods sold, it's imperative to understand the concept of cash flows in a business context. Incremental cash flows are the net additional cash flows generated by a company as a result of a new project. For example, a decrease in net working capital means that more cash is available to the company since less money is tied up in short-term assets and liabilities, while an increase in accounts receivable might not immediately affect cash flow since it represents sales made on credit. Similarly, a decrease in the cost of goods sold would result in higher profits and thus higher cash flow, provided those sales are cash sales and not credit. An increase in taxes, however, would reduce the company's cash flow.
Regarding the question options:
- Increases in accounts receivable typically do not immediately contribute to cash flows because they represent future cash inflows.
- A decrease in net working capital is a clear sign of higher cash availability and thus contributes positively to cash flows.
- An increase in taxes impacts cash flows negatively, as it represents cash outflows.
- A decrease in the cost of goods sold increases profits and would positively affect cash flows if those goods are sold for cash.
Therefore, the correct incremental cash flow examples among the given options are: a decrease in net working capital, an increase in taxes, and a decrease in the cost of goods sold.