Working Capital Assumptions in a Financial Model

This video explores important variables to keep in mind when you are developing working capital assumptions for the projected period in a financial model. The purpose of this introduction is to encourage you to think through how working capital decisions impact cash flow. As an analyst, you should be comparing a company’s working capital balances to industry standards and to the competition.

So, what should you be looking for when you are developing working capital assumptions for the balance sheet? This video is focused on three items to be cognizant of when building this schedule for a “quick” LBO exercise: relevant data, large fluctuations in working capital accounts and opportunities to optimize working capital.

How Seasonality Impacts Working Capital and Cash Flow:

Excel Template and PDF Notes (ASM Subscriber Content):

LBO Case Study:

Private Equity Training:

[enricobernardi]

Excellent content as always! What about other items like accruals, contract assets/liabilities, prepaid expenses etc? Do you also include them in the NWC calculations? What are the modeling implications of these items? Also, how do you go about modeling working capital for an industry like shipbuilding? Do you still use DxO? Thanks for sharing these great videos with us!!! They are super useful!

[jd]

Good video, as usual. Short and to the point. Do you review credit applications and policies during DD? also in the PPE video, would you mind touching on : 1. how you calculate growth vs maintenance Capex 2. Deferred Capex please?