Determine the movements in working capital, Financial Management

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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.

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