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I am trying to understand the reason for negative account receivable on operating cash flow.
Canada How can account receivable on CFO be negative?
- Thread starter rajthummar
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Accts receivable End of last year 2,000 CAD
Accts receivable End of current year 10,000 CAD
Cash Flow effect 8,000 CAD Decrease in Cash Flow because this is uncollected sales which is part of income or think of it as company had to use its own cash to finance the credit sales
Accts receivable End of current year 10,000 CAD
Cash Flow effect 8,000 CAD Decrease in Cash Flow because this is uncollected sales which is part of income or think of it as company had to use its own cash to finance the credit sales
Remember that the working capital section of CFO is a reconciliation from net income. An increase in A/R resulted in sales being included in net income, but unless that A/R is collected, those sales aren't cash, and need to be backed out of net income.