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?

Question

Business

Simeon Bradley

25 August, 22:47

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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Bruno Rangel · 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