Does anyone know why after-tax operating cash flows ignores any changes in net working capital? The formula is shown as CF = ((sales - cash operating expenses) x (1 - tax rate)) + (depreciation x tax rate). In the England Vignette #4 in corporate finance, they show year-to-year increases in working capital, but this is supposed to be ignored when computing after-tax operating cash flows.
It just seems odd, especially considering treatment of changes in working capital for “operating cash flow” from financial reporting. Is this an entirely different concept?