Question

Which of the following changes in working capital will result in an increase in cash flows? Increase in accounts receivable Decrease in other current liabilities Increase in inventories Increase in accounts paya

Answer 1

Increase in accounts payable if A/P increases then, the company has delayed payment to suppliers therefore, saved cash this generates cash flow.

Step-by-step explanation:

Increase in accounts receivable: If A/R increase this means less sales were collected hence, less cashflow

Decrease in other current liabilities If liabilities decrease, this represent payment made for the company to settle old debt thus, less cash flow

Increase in inventories more inventories means more cash used to acquire goods thus, less cash.

Increase in accounts payable if A/P increases then, the company has delayed payment to suppliers therefore, saved cash this generates cash flow.