The sub-lines
- Decrease (increase) in accounts receivable.
- Decrease (increase) in inventory.
- Decrease (increase) in prepaid expenses.
- Increase (decrease) in accounts payable.
- Increase (decrease) in accrued expenses.
- Increase (decrease) in deferred revenue.
Why a receivables build reduces OCF
Revenue was recognised in the period, lifting net income. Cash did not arrive. The receivables build undoes the net-income lift inside the OCF reconciliation, so the cash flow statement reflects the actual cash position.
Normalising for seasonality
Use trailing twelve months, not quarterly snapshots. Retailers, agriculture, and education show large within-year swings that net out across a full year.
What a payables stretch signals
Sustained payables growth above purchasing growth is a short-term cash flatter. It is reversible (the next period's cash flow absorbs the unwind) and tends to draw vendor scrutiny if sustained.