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TMKKMHinson-

When condidering changes to working capital it's the net difference that is important. So in your example, the $1 addition to inventory is offset by the addition to payables (a wash). Basically it is the source and use of cash that is meaningful. The increase to payables is a source of cash, while the increase in inventory is a use of cash. You would want to see a positive relationship between the two (meaning you taking in more cash than you are paying out). This is the heart of the defensive statement.

Would love to get Hewitt's input as well. Hope that helps.
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