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Sir i watched the lecture of working capital management but i still don’t understand one point
First of all i would like to confirm that whenever there is a change in receivable days or payables days there will a change in cash flow of a particular month just like in Hgr co question…right?
Secondly i understood in HGR co june 2009 question that the fall in receivable days leads to increase in cash flow in month 1 2 3
But i don’t understand why the reduction in inventory days leads to any change in cash flow
Kindly explain the reason for effect of change in cash flow as a result of change in inventory daysWhenever there is a change in receivable days or payables days, there will be a change in cash flow of a particular month. This is because changes in receivable days and payables days directly impact the timing of cash inflows and outflows.
In the case of a reduction in inventory days, this means that the company is holding less inventory for a shorter period of time. This leads to a decrease in cash outflows related to inventory purchases and storage costs. As a result, there is an increase in cash flow.
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