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

Find out the price of equity shares., Following details are related to thre...

Following details are related to three companies which are identical except in terms of ''r''. Company ABC Ltd. MNC Ltd. XYZ Ltd. Cost of capital 10% 10% 10% Earn per

Define a callable bond, What is a callable bond?  What is a putable bond?  ...

What is a callable bond?  What is a putable bond?  How do each of these features affect their respective market interest rates? A callable bond may be retired untimely at the dis

Define country’s economic well being enhanced, How is a country’s economic ...

How is a country’s economic well-being enhanced through free international trade in goods and services? As per to David Ricardo, with free international trade, it is mutually adv

Maturity risk premium is zero, The actual risk-free rate is 4%. Inflation i...

The actual risk-free rate is 4%. Inflation is likely to be 3% this year and 4% during the next 2 years. We suppose that the maturity risk premium is zero. What is the yield on 2

Return on investment , Return on Investment (ROI) In accounting it is a...

Return on Investment (ROI) In accounting it is a measure of the earning power of an industries asset. A high return on investments is desirable. ROI is widely described as net

Analytical way of viewing financial problems of a firm, Analytical way of v...

Analytical way of viewing financial problems of a firm The new approach is an analytical way of viewing financial problems of a firm. The main contents of this tactic are what

Determine the key points in the turnbull report, Key points in the Turnbull...

Key points in the Turnbull Report: Have a defined process for review of effectiveness of internal control. Review regular reports on internal control. Consider key

Shareholders and auditors, agency relationship between shareholders and aud...

agency relationship between shareholders and auditors

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