A facility management pro forma cash flow statement has beginning accounts receivable and payable balances of ¥18,000,000 (Japanese Yen) and ¥20,000,000. The facility manager estimates ending balances for accounts receivable will decrease and accounts payable will increase. Based on these projections, what is the combined effect on cash available?

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A facility management pro forma cash flow statement has beginning accounts receivable and payable balances of ¥18,000,000 (Japanese Yen) and ¥20,000,000. The facility manager estimates ending balances for accounts receivable will decrease and accounts payable will increase. Based on these projections, what is the combined effect on cash available?

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Apollo · Answer 1

Cash available will increase.

Explanation:

Decrease in of Account Receivable in terms of cash:

The company will collect quicker from his customers. Theerfore the collection cycle will decrase and more cash will be available for use

Increase of Account Payable in terms of cash:

The company will delay payment for longer period of time. The payment cycle will increase. Less cash will be used as the obligation are settle in longer periods

Overall:

The combined effect will increase cash available, as the cash inflow increase form the reduced collection cycle. And also, the cash outflow decrease from the increase in the payment cycle