DCF Valuation Net Working Capital

Hi All,

 

I am currently trying to complete a DCF, but am stuck on what I should select in terms of Capital Assets vs Capital Liabilities. Below is a screenshot of the balance sheet, I know typically Assets include: AR, Inventory, other receivables, and Other current assets. While Liabilities includes: AP, other current liabilities, and deferred revenue. But would Prepaid income taxes and prepaid expenses be included in Assets? Then for Liabiliteis what about Salaries, self insurance reserves, current operating lease payable, current portion of long term notes payable, and amount due to government entities?

 

Any help with this would be huge!

Comments (3)

 
Feb 12, 2021 - 9:44am

So alot of this stuff can be googled, just a heads up. But to answer your question: 

 

Prepaid income taxes/Prepaid Expenses are Assets and an increase in those accounts are a negative impact on NWC (as these are a use of cash).

By salaries do you mean something like salaries owed? Salaries themselves will not sit on the balance sheet. 

Operating lease payable is a liability since that is money owed, an increase in this account would be an increase in NWC (a "source" of cash)

Current portion of LTN and Due to govt entities would be liabilities as well (without diving any deeper I would assume they are categorized as current liabilities). 

 
Feb 12, 2021 - 11:21am

Hey Cuse,

Thanks for the breakdown I tried googling it before and I honestly think it just confused me even more, I should have just thought of it how you did with its effect on cash.

Thanks

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