Determine the movements in working capital, Financial Management

Assignment Help:

Movements in working capital

The year-end balances of trade, inventories and other receivables and payables are taken for current year-end as well as last year-end statement of financial position

	Decrease	Increase
Inventories	Cash inflow	(Cash outflow)
Receivables	Cash inflow	(Cash outflow)
Payables	(Cash outflow)	Cash inflow

An increase in inventories implies that more cash has been spent to obtain the inventories; hence it is a cash outflow.
A decrease in inventories implies less cash has been used to obtain inventories;hence it is a cash inflow.
An increase in trade receivables'implies that more credit customers are taking longer to pay or takingcredit,which means less cash for company, so cash outflow.
A decrease in trade receivables implies less credit customers, therefore cash inflow.
A decrease in trade payables implies the business is paying the suppliers quicker, resulting in cash outflow.
An increase in trade payables means that business is taking longer to pay the suppliers, so holding the cash in the business longer implying it's a cash inflow.

Related Discussions:- Determine the movements in working capital

FINANCE., FINANCIAL MANAGEMENT

FINANCIAL MANAGEMENT

Determine the circumstances is a warrant’s value high, Under what circumsta...

Under what circumstances is a warrant’s value high? Explain. A warrant’s value would be high while the stock prices, time to expiration, and/or expected stock price volatility a

What is an annuity?, What is an annuity? An annuity is a sequence of e...

What is an annuity? An annuity is a sequence of equal cash flows, spaced consistently over time.

How can we calculate the average inventory, Inventory days (Average in...

Inventory days (Average inventory/Cost of sales) x 365days Average inventory can be arrived by taking this year's and last year's inventory values and dividing by 2 - (Ope

Advantages of floating rate notes, Advantages of Floating rate notes: W...

Advantages of Floating rate notes: We know that the coupon rate is fixed for fixed rate bonds and that throughout its tenure the investor receives coupons at a predetermined in

Advanced investment appraisal,

Fundamental ingredients of management of working capital, Fundamental ingre...

Fundamental ingredients of Management of working capital Management of working capital has two fundamental ingredients: (1) an overview of working capital management as a wh

prepare a cash budget, You are presented with the budgeted data shown belo...

You are presented with the budgeted data shown below for the period November 20X1 to June 20X2 by your firm. It has been extracted from the other functional budgets that have been

Monetary policy, Monetary Policy The Federal Reserve's goal is to regul...

Monetary Policy The Federal Reserve's goal is to regulate the growth of the monetary aggregates to ensure sufficient credit expansion to foster economic growth, without inflati

Personal finance chapter 9 workbook 2nd edition, answers for the personal f...

answers for the personal finance literacy 2nd edition workbook answers chapter 9(obtaining and protecting your credit)

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages