Working Capital
The most litigated line in a transaction, and why it always has two defensible numbers
The thesis
The same company has two working capital numbers, both defensible, and the gap between them reaches 11.7% of the price. The choice of closing month is worth more than most of the definitional debates
What the study establishes
1
Receivables discounting is a Brazilian distortion with no equivalent in imported models
2
The neutral-zone collar creates a discontinuity that encourages last-minute manoeuvring
3
The twelve-month average is more defensible than any single month, and is almost never used
Contents
- The two numbers
- The definition
- The reference
- Seasonality
- Receivables discounting
- The collar
- The constructed case
- The gaps
- The mandate