Register now or log in to join your professional community.
If both debtors and creditor increase with the same amount then net change in working capital is zero. So working capital does not change if both increase with the same amount.
no
working capital = current assets - current liabilities
Increase in debtors would effect the increase in current assets this would effect increase in the working capital needs and increase in creditors payment period would increase the current liabilities of the company and this would effect decrease in working capital needs.
Hence the statement is partially correct the extent increase in debtors would result in increase in working capital however an increase in creditors payment period would effect reduction in working capital.
Do you need help in adding the right keywords to your CV? Let our CV writing experts help you.