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Negative Account receivable, Account payable and Inventories

Questions › Category: Financials Quadrant › Negative Account receivable, Account payable and Inventories
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JC Cheng asked 2 years ago

Hi Victor/Rusmin,
Account receivable is the money owned by customer and Account payable is money owned to supplier.

  • What does it mean when trade and other receivables is negative in cash flow statement?
  • What does it mean when trade and other payables is negative in cash flow statement?
  • How to interpret negative inventories in cash flow statement?

Thanks.
Regards,
JC

2 Answers
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Victor Chng answered 2 years ago

Hi JC,

If the trade and other receivables is negative in cash flow statement means that they have not collect back the money from their customers.

As for negative trade payables means that the company paid the supplier the amount that they owe them.

Negative inventories means that the company uses their money to purchase the inventories while positive inventories means that they managed to sell the inventories and get back the money.

Chor Loo replied 2 years ago

Hi all,

Just to add on…from balance sheet perspective, Trade and other Trade receivables would have grown for comparative period. Hence the negative.

For receivables, to complete the analysis, should also check against sales (Hence receivables days on hand). If that has lengthened, it could indicate collection issues or perhaps change in business model.

Likewise for payables and inventory.

Thought this would be more complete. But may have digressed from what JC is looking for.

JC Cheng replied 2 years ago

Thank you, Chor.

Victor Chng replied 2 years ago

great sharing Chor Loo

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JC Cheng answered 2 years ago

Hi Victor,
Appreciate your sharing. Now I can connect more dots in cash flow statement.
Thanks.
 
Regards,
JC

Victor Chng replied 2 years ago

You are welcome :)