Can you please explain me the meaning of Working Capital.
If, Working Capital = Current Assets - Current Liabilities and Current Assets contains the Cash component, why do we consider an increase in working capital as a cash outflow ?
Because in that context (e.g., indirect method CFO) we’re talking about working capital (excluding cash).
Sorry, I didn’t get you. Could you please explain it in detail
When you’re using the indirect method for CFO and it says to subtract the net change in working capital, that means the net change in working capital other than cash: the net change in A/R and inventory and prepaid expenses and A/P and wages payable and so on.