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Changes in Working Capital for FCF
I have seen the calculation for change in WC on CF stmt done many different ways for calculating FCF. For context, some FCF analysis I've looked at takes into account the change in all operating assets and liabilities from CF while others remove items such as change in Op lease liabilities from the...
Cash Burn Calc
How do most people calculate cash burn? Is it just operating cash flow less investing cash flow? Or do some people only look at the total expenses of the business less capex (i.e., not consider changes in WC)?
Net working capital and deferred revenue, SaaS Deal.
Hey all, we are closing on a SaaS acquisition and one of the key sticking points in the PA is regarding working capital as it relates to deferred revenue. Targetco bills 100% of revenue upfront on a cash basis, they do not book it as deferred revenue. When we pushed back on the owner he argues that...
Positive cash flow from working capital sources?
How can a firm have positive NWC over a course of few years? Some of the reasons I can think are 1. If they are pushing back on payables every year by some time 2. If they collect more deferred revenue every year going forward etc.. What other reasons could make this happen? Thanks in advance :)
Working capital and seasonality / strong growth
Hi guys, Quick questions : 1. what's the best practice when calculating the WC peg for businesses that experience large swings due to seasonality? (say you want to buy a business either before or after a peak in WC due to seasonality) 2. What's the best practice when calculating the peg for a...
What do you guys consider liabilities in NWC target?
Hi, Some quick questions in WC for the experts :) When you guys are negotiating a normalised level of WC: - what are the typical adjustments you make to WC? (how do you define what goes in or out of the WC calculations?) - how do assess what goes into liabilities? - what are the benefits for the...
Working Capital
Hi All, I was looking at a few syndicated deals where the sponsor was modeling working capital. At the end of the hold, the sponsor was showing the return of working capital. I’ve seen deals where working capital is not returned and where it is returned. Can someone comment on why syndications...
Working Captial industry differences
I’m new to this and wondering what is the actual explanation for why working capital metrics like current ratio, quick ratio or CCC can be very different between industries? Like what’s the reason for why Healthcare has or doesn’t have a higher ratio than Industrials? Do consumer companies...
How to forecast working capital items?
I'm trying to model Netflix as a personal exercise and have a quick question. Netflix has working capital assets that don't fall into the neat working capital categories of "Receivables," "Inventory," or "Payables." They call these assets and liabilities "Current content assets" and "Current content...
Negative Working capitall
Hey guys, Let's say the industry i am researching is generally negative working capital (-10% of the forecasted revenue). Thus, let's say the revenue is 20Millions, the working capital required for general working purpose is 2M or -2M?? I am unable to reconcile the fact since it is negative working...
DCF Change in Working Capital
Hi guys, Hope you are well, could someone please explain why change in working capital is so important in DCF models? Is it because it tells you the funds a company needs for the day-to-day core operations of a company. Shouldn't it be quite consistent? Thank you for your help in advance.
Funding of Working Capital
I was recently asked this question during an interview: how could a firm fund working capital besides debt?
How do you calculate working capital for a mining company?
Hi all, I have recently came across the mining company and wonder if common working capital forecasting methods (% of COGS/Sales or days outstanding) would still be appropriate? Or is there is a better method? Explanation for my question: Inventory reported on the BS of a trading firm, distributor...
The Difference Between NWC, EFN and Working Capital Requirement
A newbie here.. please help.. What are differences between NWC, External Financing Needed (EFN) and Capital Working Requirement? Which one really shows the needs for working capital from M&A view? NWC = CA - CL EFN = Capital Working Requirement = COGS * {(DIH + DSO - DPO)/365 }
quick working capital question (late night at work / no analysts around)
hey guys - simple question but literally no one is around to ask. should wages payable go into the typical banking / PE definition of working capital? thanks!
Funds Payable Working Cap Question
Need a hand in a 3 statement model. Working on an international payments company (think Paypal). I am trying to figure out if Funds Payable should be rolled up into Accounts Payable, and used in Non-Debt Working Capital formula. The company's 10-k defines Funds payable as: "Funds payable to...
Accounting Due Diligence - understating debt
Hey monkies - my PE prep book says that in accounting due diligence, Accountants make sure that "any outstanding liabilities are categorized properly as debt or working capital. "this is important because debt is subtracted from the purchase price, so sellers have an incentive to classify iffy items...
Analyst Reports (Specific to Working Capital or DuPont)
Hello, I have a question. Do any of you fine individuals know how i can track down a specific analyst report? I have access to a wealth of financial databases, every one from Thomson to Bloomberg, and I want to find a way I can search by company while also entering something specific in the search...
Difference in reported CFO line items vs. calculated corresponding B/S change help?
Can anyone explain to me why a CFO line item (or any SCF line item) may not reflect the same number as I calculate from the balance sheet for a corresponding line item? I'm working on modeling Starbucks and a number of working capital and non-cash items do not match what is reported on the B/S or...
Determining Working Capital/Minimum Cash Levels
Can anyone shed any light on best practices for determining a reasonable estimate of a company's working capital requirements? - I'm mostly interested in this in a restructuring context for adjusting a company's working capital when it gets out of wack due to financial distress. Also interested if...
Sum-of the parts DCF help!
I need to run a sum-of the parts DCF valuation on a particular firm. Since FCF is NOPAT- Change in Working Capital - Capex + D&A, I need Change and Working Capital for each division of the business. Do I just calculate change in working capital on a consolidated level, and multiply it by the Revenue...
Working Capital: Cash Conversion Days
Hello, I am looking at a company's cash conversion cycle, per below: Days Receivables + Days Inventory - Days Payable = Cash Conversion Cycle (days) Any thoughts how changes in this cycle (from one period to the next) influence cash and debt balances? If for example we go from 50 days in a period to...
working cap and cash
Hi all, Just want to confirm my understanding of the correct treatment of working capital and cash in a DCF calculation. The assumptions are: 1) Forecast balance sheet has been provided with various types of current asset and current liability items; 2) The company also possesses a decent amount of...
Net Working Capital - Valuation model
To any/all who can advise on a question I have regarding the following, I'd have much gratitude: I am working out a Valuation model for a theoretical Steel MFG outfit, using a Free Cash Flow - NPV approach to find a value for the firm. I have mocked up financials, and only a small amount of...
Capital budgeting decision making and the treatment of working capital
Hello everyone, I am currently a student at Strathclyde Business School. I have come across a mind boggling difficulty in a capital budgeting question for my finance assignment. The question primarily addresses capital expenditure decisions, whether a new machine must be bought to increase...
Change in Operating Assets/Liabilities Question...
I'm working on a model and using Coke as a reference, and ran into a strange issue. In the cash flow statement, for 2009 Coke states Net change in operating assets and liabilities as the sum of the following increases/decreases: trade accnts rec (404) inventories (50) prepaid expenses (332) accnt...
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