I came across a problem (supplemental material, not CFAI EOC) that asks for the initial cash outlay of a possible equipment purchase.
One of the line items for this problem stated that the purchase would cause current assets to increase by $15,000 and current liabilities would increase by $10,000 ($5,000 net change).
My thinking is that this positive change in net working capital would cause the initial cash outlay to decrease by $5,000 (i.e., the change in net working capital would be treated as an inflow). However, this is not the case and in the answer explantion, the change in net working capital (+$5,000) is treated as a cash outflow.
I’m having trouble understanding this conceptually. If someone could briefly explain to me why a positive change in net working capital wouldn’t be treated as an inflow I would appreciate it greatly!