ECONOMICS

Detailed explanation-1: -The cash flow effect from a change in Net Working Capital is always equal in size and opposite in sign to the changes in Net Working Capital.

Detailed explanation-2: -Therefore, if Working Capital increases, the company’s cash flow decreases, and if Working Capital decreases, the company’s cash flow increases. That explains why the Change in Working Capital has a negative sign when Working Capital increases, while it has a positive sign when Working Capital decreases.

Detailed explanation-3: -Working capital and free cash flow are both important measures of a company’s financial health. They’re not the same thing, but they’re both important. Working capital is a measure of a company’s short-term financial health, while free cash flow is a measure of a company’s financial health over the long term.

Detailed explanation-4: -Which of the following is true of the impact of cash flows on net working capital? The more predictable the cash inflows of a firm, the easier is the working capital management.