[mplouis]

Explain why an increase in net working capital decreases operating cash flow.

[morgaine300]

No reason it has to.

An increase in working capital means you have an increase in current assets, or a decrease in current liabilities, or both. This has to (net) be offset with a decrease in non-current assets, increase in non-current liabilities or increase in equity.

It could be caused, for example, by selling a fixed asset for cash. (Increase to current asset, decrease to fixed assets, and possible increase/decrease to equity through gain/loss.) There is nothing in there that affects operating cash flow, let alone decreases it.

The operating cash flows could decrease, but it would have to be a combination of transactions that also involved increases in other current assets. For instance, paying cash expenses of $5000 would decrease cash and decrease equity, and then $10,000 of revenue on account would increase receivables and increase equity. Operating cash decreases, net current assets increase which increases working capital, and liabilities haven't changed.

The statement as you have it is not true. It says "why does it decrease operating cash flow," as though it's a given, when it's not.