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

Define the gropus of profit maximisation criterion, Define the gropus of Pr...

Define the gropus of Profit maximisation criterion Profit maximisation criterion has, though, been questioned and criticized on several grounds. Reasons for the opposition in

Find the nominal rate of interest, (a) Find the nominal rate of interest j ...

(a) Find the nominal rate of interest j compounded quarterly which is equivalent to a 5% e ective rate of interest. (b) Which one will deliver a higher future value on a deposit

Accounting, Accounting : Many people believe financial management only r...

Accounting : Many people believe financial management only relates to bookkeeping and the establishment of accounting reports which reflect those transactions in the books.  Whi

Longer-term bonds and short-term bonds, Questions How is a bond like...

Questions How is a bond like a loan?                                               How does an investor receive a return from buying a bond?  Does a bond's yield to ma

What is unsanctioned expenditure, Q. What is Unsanctioned Expenditure? ...

Q. What is Unsanctioned Expenditure? The expenditure, which is regularly incurred without the sanction of the competent authority or beyond the sanctioned limit of funds provid

Jit inventory control system primary recuirement, What are the primary requ...

What are the primary requirements for a successful JIT inventory control system? For a JIT system to be victorious the supplier must be willing and able to deliver materials im

What is cost recovery method, Q. What is Cost Recovery Method? Cost Rec...

Q. What is Cost Recovery Method? Cost Recovery Method - METHOD OF REVENUE RECOGNITION that identifies profits after costs are entirely recovered. Normally used only when the to

Bonds with warrants, Bonds with Warrants: Warrants are usually attached...

Bonds with Warrants: Warrants are usually attached with the bonds or preference shares to attract the investor. The objective is to induce the potential investors to subscribe

Expalin depository institutions, Depository institutions Depository ins...

Depository institutions Depository institutions: intermediaries with a important proportion of their funds derived from customer deposits - include commercial banks - savings i

Operating cycle, discuss an operating cycle of vegetable growing in Uganda

discuss an operating cycle of vegetable growing in Uganda

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