Calculate a normalized working-capital target
Calculate a working-capital target that reflects normalized operating requirements.
Seller proposes a USD 4.8 million peg based on last month. Historical monthly operating working capital averages USD 7.9 million, and vendor payables were stretched by USD 1.1 million before close. Define operating accounts -> choose normal period -> adjust abnormal behavior -> set target The common trap is using the latest balance because it is available, even when it reflects pre-close cash management instead of normal operations. Define the operating population Include trade AR, inventory, trade AP, accrued payroll, and deferred revenue. Exclude cash, debt, tax receivables, and transaction costs. The peg should measure operating fuel, not items handled…
Sign up free — one personalized lesson every day, matched to your role and goals.
Already have an account? Sign in