Working Capital Question

Hey what’s up

• so let’s take it operationally here: you go to McDonald’s (example only based on your point) for your favourite triple cheese burger or whatever. You will basically pay at the counter right? And when has this delicious triple cheeseburger been made? Just now. So when the cheeseburger is done and attributed to you, you basically pay in the same day at the counter. Thus ARs in such B2C configurations remain low. On the other hand, you have your favourite tomatoes suppliers that you have ordered from but these guys, in such a B2B form, you can pay them at 30/40/50 whatever days. So negative trade working cap. So the rolling working cap is negative.

On the second point, these suppliers are necessary for you to make the food upfront right? Meaning you can’t sell the cheeseburger if you don’t have the supplies readily available (not the case for all industries), so you supply the tomato, then instead of McDonald’s paying now, this payable is recorded, and basically settled after, when money is received from the customer. So instead of cash sitting somewhere, you can use the money you just received from your delicious triple cheese to pay the tomatoes, cheese, beef suppliers towards which you already have as payable.

Hope this clarifies.