Hi everyone,
I am computing the WC amount needed to adjust the EV.
| Net Working Capital, per last balance sheet available: -665k | Average NWC, last 12 months: -797k
...this returns NWC surplus of 132k. Can anyone possibly explain why both are negative and how I can reflect this before adding the 'surplus' of 132k onto EV as an adjustment?
Sector of the firm is within Human Capital.
Cheers
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In EV calcualtion, why do you care about adjusting for NWC?
You add the 132k into that year’s cash flow because it represents a source of cash (you have 132k more being loaned to you, interest free if it should be counted as a current liability). This change in cash flow affects your EV.
NWC icreased, it is actually a use of cash and you should subtract it in calcualting free cash flow..
Hey, do you mean because an increase in NWC is a use of cash because it used to purchase CA(Inventory)? Thus that use of cash should be taken out of cash flow that year
yes. Or for example accounts receivables could have inceased and we should subtract it to indicate that we haven't actually collected cash
apologies, did not see the negative signs in front of the NWC amounts... the reverse logic is the same
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