ishfaque

Ok, so after reading the comments here, I went back to the CFA FRA book and some sanity seems to have been restored. Tell me if I am making sense:

CFO is calculated by adjusting Net Income for Non cash items (adding A/P to Net Income)
When you re-classify your A/P, your A/P = 0, so CFO goes down. Also, your CFF goes up because you re-classified it as a short term loan. You do this when your CFO is seasonally strong so that you don't take a big hit. Now all your A/P is retired and you can start collecting A/P again for a while and boost your CFO up. Then in some other quarter, when CFO is again seasonally strong, you finance your payables. That is how you manage your CFO. And yes, your operating cycle changes as you mentioned.

I hope this thinking is correct. And now, all your comments are making a lot of sense to me!