Estimating working capital for a company on cash basis accounting
I just started a role in corp dev for a firm that owns/operates medical practices. Almost all of the targets we look at are on cash basis accounting so we have to estimate seller working capital. Since there is no AR/AP on cash basis balance sheets, we typically estimate AR by asking the seller how frequently billing is submitted i.e. weekly, bi-weekly, monthly etc and estimate AR from there. For AP we typically base our estimate on how often the target pays its employees and largest vendors.
Is the above approach sound? How can it be improved?
I don't believe cash basis accounting has any receivables or payables since transactions only record when the cash moves.
Voluptatem delectus aliquam nesciunt natus dolorum repudiandae ullam fuga. Sapiente et repellat reprehenderit. Neque optio quis maiores consequatur omnis. Illo quia eum dicta quo minima.
Beatae assumenda consequatur architecto sunt nihil eaque est. Illum corporis sed voluptatum est ad est eaque ad. Et eos maxime autem aut porro. Tenetur consequatur hic aut ducimus quasi ipsum eaque in.
Natus dolorem ipsum neque dolor ad. Velit et commodi et aut. Nam earum similique repellendus consectetur iste quo inventore eum.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...