Hi,
Imagine the following situation.
Company A is buying inventory in cash for 100, selling for 200 cash to customers. How would you model the WC? My approach? No AR, no AP, just negative 100 every year for increase in inventory?
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How much they're selling it for is irrelevant for the purposes of calculating NWC. Remember that these are all balance sheet items and thus are showing an exact moment in time as opposed to changes over time.
Following your example let's assume that in the prior year period they have $100 worth of inventory. If throughout the next year they bought another $100 worth of inventory and sold it, they would still just be at $100 worth of inventory by the end of the year. Assuming they have no other current assets or any current liabilities, there would be no change to the company's working capital.
They had $100 worth of inventory when the year started and had $100 worth of inventory hen the year ended.
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