Buys material worth 1 lac - inventory will increase by 1 lac (current assets)
Mar 05 2013 10:03 PM
Payables will increase by 1 lac - current liability
Like you said it is true that cash will go up due to revenue, but that cash will be immediately used to pay down payables to the suppliers. Hence current assets will be lower then current liabilities and hence working capital will be -ve.