Thanks for taking a look at this - see below for quick summary. Very high level model. Have 2016/17 balance sheet, no balance sheet projections. Need to know what to use as driver going forward.
In driving Change in NWC impact going forward, do you:
A) Take WC as a % of sales each year, then use the delta of those two numbers for your FCF impact
-OR-
B) Take change in NWC from '16 to '17 as % of sales
Thanks in advance
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I believe either of the following two options is correct:
1) NWC as a % of sales 2) change in NWC as % of CHANGE in revenue
what does the % of change in revenue mean? How is this different from ((final rev - initial rev)/(initial rev))?
Change in NWC as % of change in revenue. Assumption is every unit of growth will proportionately drive the items within working capital.
which is same as % of revenue. I.e. if change / delta nwc = 5% of revenue, if revenue increases, delta nwc increases proportionally
So either method is valid?
i believe so
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