change in nwc

CFA Level II
#1

ac rec are 20k in 07 decreases to 15k in 08 that inc wc becase you collected 5k?

#2

That would be a decrease in working capital of 5k. It would reflect an increase in CFO of 5k. Remember: CA-CL = Net working capital. For purposes for calculating FCF, however, cash, cash equivalents, and current and LT debt are not included.

#3

Change in WC = {(AR_year2 - AR_Year1) + (Inv_year2-INV_year1) + …} - {(AP_year2 - AP_year1) + …} = {(20k - 15k) + 0 - 0 = 5k

#4

but if yoy are looking at cashflow the decrease in A/C receivable is positive i.e. it will increase CFO