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How an increase in accounts receivables is considered a use rather than a source of cash?
Wiki User
∙ 13y ago
It is considered a use of cash because for every dollar that should be coming in to the company from those who owe the company money, that cash has been delayed for a collection time period. Therefore, the company does not have the money to use for its own operations. Think of it as a friend who owes you money; you will get the money eventually (hopefully), but you can't spend it on anything now.
To further illustrate, Accounts Payable is a source of cash because you have yet to pay that money, and still have the cash in your possession. Now your friend lends you $, and you can spend it on anything you need.
Hope this helps! :)
Wiki User
∙ 13y ago
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