usually, which item are under working capital, an increase /decrease imply which kind of transaction? Thanks.
For this test working capital usually means the change in accounts receivable + inventory - accounts payable. When it goes up, cash goes down.
In capital budget analysis, the initial investment outlay and TNOCF are concerned with net working capital : NWCinv = non-cash current assets - non-cash current liability. Increase in assets (e.g., accounts receivable, inventory) would require financing, and increases in liability (e.g., accounts payable) reduces additional financing Hope this helps…