Working Capital Discrepancies

[avedxrnv26]

Hello everyone,



Forgive me if I am being completely stupid...



Colin posted a post a while back asking why there were differences between receivables on the balance sheet and in the cash flow statement - to which the reply was that there shouldn't be.



I am having similar problems but with regards to working capital in general. I can't get my head round why there would be a difference in a company's changes in working capital on the balance sheet and their changes in working capital on the cash flow statement.



Am i right in saying that to calculate changes in WC we just take say: this year's CA - CL and then subtract last years CA - CL?



If thats the case then shouldn't the cash flow statement figure in changes in working capital be exactly the same?



Do companies include some items in WC on the cash flow statement that aren't on the balance sheet?

[BasirZek]

If I am really missing something then forgive me I am still new to this and am really struggling with this one! I suppose my overall question is what's the rule with reporting working capital changes on both balance sheets and cash flow statements? i.e. can you include/omitt certain things when dealing with working capital on the cashflow statement? What would be really great is, if that is the case, which parts of WC changes you guys think are best to include when calculating FCF.

[Barrackhite]

You are correct that working capital = CA - CL and the method you used to calculate changes in WC is also correct.

[bcar1qyd]

As for why the cash flow statement may differ, keep in mind that the balance sheet represents the assets of the company at a specific point in time. The cash flow statement is not the same as the balance sheet. Cash flow is simply cash in and cash out.

[bayaduf]

With regards to Walmart i guess they have so much buying power that they can squeeze their suppliers much more than others, so maybe their few years of quicker payments to suppliers could be followed by a few years increases in days payable, hence improving cash flow.