How to forecast working capital items ?
Hi everyone !
I'm wondering how can I forecast working capital and more specifically " current asset or current liabilities". I first took the opening and the closing balance previous year and I calculated the variation. But, I would like to find a better methods. If you can suggest me some articles, website I would be glad.
You should use the efficiency ratios: DPO, DSO and DIO (look fo them on google).
It means relating the WK investments to revenue trends and then you can hypothize efficiency performance --> improvements or worsening of management of WK based on assumptions of the companies and industry features
Sorry for the late reply. Thank you for your response! I am also searching how to forecast accrued payroll ? by any chance, do you have a method as well?
Given that I have never forecasted it, I would opt for one of the following methods, ordered form the one I would use to the last chance:
Each one using the same formulas used in the DPO,DSO and DIO but substituting the denominator with the measure I suggested in the bulllet points.
Thank you for your clear explaination :) I will try
You need to look at pay period timing if you're trying to get a very accurate accrued payroll balance.
If you're just looking for trends then Ajeje's methods are fine, but if you need a specific 12/31 balance (and it's material) you need to look at pay periods. If employees are paid every 2 weeks then timing could make a big difference in the accrual
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