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

Bond and Stock valuation, 2. Suppose a 12% coupon bond sells at par today; ...

2. Suppose a 12% coupon bond sells at par today; and three years from today, the required rate on the same bond is 8%. What is the coupon rate on the bond today and what will it be

Why use the modified du pont system to calculate roe, Why would an analyst ...

Why would an analyst use the Modified Du Pont system to calculate ROE when ROE may be calculated more simply? Explain. In fact, an analyst would not use the Modified Du Pont equ

Monte carlo simulation model, Monte Carlo Simulation Model Monte Carlo...

Monte Carlo Simulation Model Monte Carlo simulation is used to analyse to what extent the valuation of the chosen company is dependent on the assumptions. Monte Carlo simulati

What is an audit?, Question 1 What is Depreciation? Question 2 What a...

Question 1 What is Depreciation? Question 2 What are the elements of an accounting system? Question 3 How do you prepare Flexible Budget? Question 4 Briefly explain

Evaluate the initial exchange of cash, Consider a currency swap in which th...

Consider a currency swap in which the domestic party pays a fixed rate in foreign currency, the UK pounds sterling, and the counterparty pays a fixed rate in US Dollars. The not

Inflation in international markets, Inflation in International Markets ...

Inflation in International Markets In 1983, Gultekin tried to find out the relation between stock return and the inflation rates (expected/unexpected). He accomplished this by

Graphical depiction using duration to estimate price changes, The price vol...

The price volatility properties of bonds with the help of the graph of the price/yield relationship. Let us now, with the help of a graph, illustrate how duration estim

Shareholder value, SHAREHOLDER VALUE There are various measures used by...

SHAREHOLDER VALUE There are various measures used by market analysts and financial experts to derive the maximum Shareholder Value of a particular company but we would take the

Cash deficit - cash budget, In two of the four months of the cash budget Th...

In two of the four months of the cash budget Thorne Co has a cash shortage with the highest cash deficit being the opening balance of $40000. This cash shortage which has occurred

Calculate total amount of dividends in arrears, QTL Tech has an issue of pr...

QTL Tech has an issue of preferred shares outstanding with a $50 stated value that pays a dividend of 7.5%. There are 325,000 shares outstanding. QTL has not paid preferred share d

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd