If looking at cash inflow and outflow;
Net income is cash inflow so add to cash balance
Expenditure is cash outflow so subtract to cash balance
Increase in working capital is the result of account receivable, which means that the company made sale but haven't received the cash, so subtract to cash balance, and
Depreciation is expense, but it is a non-cash expense, so add to cash balance.
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Jenish Desai
Student
Stephenville TX
United States
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Original Message:
Sent: 06-22-2019 10:03 AM
From: Rituparni Pinisetti
Subject: Working Capital and Accounts Receivable
Steers Company has just completed its pro forma financial statements for the coming year. Relevant information is summarized below.
Assuming that the increase in working capital was the result of an increase in the Accounts Receivable balance, the increase in Steer's cash account for the coming year will be:
| $160,000. |
| $25,000. |
| $90,000. |
| $40,000. |
This Answer is Correct
The increase in working capital is negative because an asset balance increase from Y1 to Y2 yields a cash balance decrease.
if someone could please explain this it would be great!
thanks
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Rituparni Pinisetti
Student
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