While the revenue has technically been earned under accrual accounting, the customers have delayed paying in cash, so the amount sits as accounts receivables on the balance sheet. “use” of cash) – which causes a company’s ending cash balance and free cash flow (FCF) to decline. Since an increase in A/R signifies that more customers paid on credit during the given period, it is shown as a cash outflow (i.e. On the cash flow statement (CFS), the starting line item is net income, which is then adjusted for non-cash add-backs and changes in working capital in the cash from operations (CFO) section. With that said, an increase in accounts receivable represents a reduction in cash on the cash flow statement, whereas a decrease reflects an increase in cash.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |