Decreases in working capital have to be funded with cash outflows just like the acquisition of any other asset.

Question

Quizplus · Accepted Answer

Decreases in working capital actually release cash and do not require funding. This is because working capital is the difference between a company's current assets and current liabilities; a decrease typically means that a company is either increasing its current liabilities (e.g., through more accounts payable) or decreasing its current assets (e.g., by selling inventory), both of which can free up cash.

Decreases in Working Capital Have to Be Funded with Cash