Interpreting the role of accounts payable in cash flow from operations
AB InBev is the world’s largest brewer. An abbreviated version of the operating activities section of the company’s statement of cash flows appears below:
Cash flows from operating activities (million US dollars)
Interest, taxes and noncash items included in profit
Cash flow from operating activities before changes in working capital and use of provisions
Change in working capital
Pension contributions and use of provisions
Interest and taxes (paid)/received
Cash flow from operating activities
Elsewhere in the annual report, management reveals that trade payables increased in 2011 because of higher capital expenditures. Also, these payables have, on average, longer payment terms than payables from previous years.
Explain why the increase in payables and the change in payment terms contributed to the increased in cash flow from operations in 2011. What other factors contributed to the increase?