For this you will need to understand cashflow statement definition. the receivable, payable and inventories you see in cashflow st is not actual receivable, payable or inventories, these are the delta (changes) compared to last year values. think in this way – last year you had 800 rs of payable, 600 rs of receivable and 500 rs of inventory and this year have 1000 rs of payable, 900 rs of receivable and 600 rs of inventories. So now think how much of your cash has been spent in these items compared to last year. it is
payable – now you have to pay more that means you got some money in the form of payable so it rs 1000 – 800 = 200 +ve
receivable – receivable increased from 600 to 900 that means money has gone out from your pocket to market so it is -300 changes
inventories increased from 500 to 600 that means you have spent additional 100 in inventory so moeny spent on that is -100
so how much is overall addition money you have spent on these items in this year compared to last year is 200-300-100 = -200 that means overall 200 rs of cash from your profit has gone into working capital changes. cashflow statement is about where is the cash (Profit) going. Overall + cashflow means companies is realizing its profit in terms of cash. -ve cashflow means company is making profit but is not converting profit into cash.
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