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What happens to free cash flow if net working capital increases?

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Question added by PRIYANT DHRANGDHARIYA , Finance Head , The Kampala industries and Infrastructure Development Limited
Date Posted: 2023/10/20
Fasil Pallikalath
by Fasil Pallikalath , FINANCE EXECUTIVE , EXCELLENCE DRIVING CENTER

The net working capital increases means current liabilities are reducing and current assets increasing, so there is outflow of cash than inflow. So the cash inflow will be less

PRIYANT DHRANGDHARIYA
by PRIYANT DHRANGDHARIYA , Finance Head , The Kampala industries and Infrastructure Development Limited

Working capital is a measure of a company’s liquidity. If working capital increases, it means that the company’s liquidity is reduced. This, in turn, lowers the company’s free cash flow

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