All 34 The Master Budget questions
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How does the master budget support scenario and sensitivity analysis? How do you incorporate financing and dividends into the master budget? How do you validate/sense-check a completed master budget? How does the capital budget integrate into the master budget? How do you flex or revise the master budget during the year? How do you build a master budget model that recalculates automatically? How does the master budget reflect a change in credit terms offered to customers?
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Budgeting & Forecasting › The Master Budget

How do you model working capital changes in the master budget?

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Answer

Working capital is modeled from activity and terms: receivables from sales and collection days, inventory from production/purchases and stock policy, payables from purchases and payment days. Changes in these balances are cash flows in the cash budget (an increase in receivables/inventory uses cash; an increase in payables releases cash) and set the balance-sheet positions.
Real-world example Rising budgeted receivables consume cash in the cash budget even though profit is unchanged.

Common follow-ups: How does an inventory increase affect cash? | What drives budgeted payables?

Cash Budgeting Types of Budgets The Master Budget
All 34 The Master Budget questions