An increase in accounts receivable and/or a decrease in accounts payable will usually reduce the amount of new external funds required.

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An increase in accounts receivable means that more sales are on credit, tying up cash that could be used elsewhere, and a decrease in accounts payable means the company is paying off its suppliers faster, reducing available cash. Both scenarios increase the need for external financing to support operations.

An Increase in Accounts Receivable And/or a Decrease in Accounts