# calculating working capital

Alright, retarded question here: What goes in Working Capital? I thought it was: Change in Current Assets (excluding cash & eqv) - Change in Current Liabilities But when I do the calculations for the data below (excluding the lines that begin with a “XX”), I get -205,271. Both the Company and Google Finance say it should be -194,588. Are there any non-current assets on liabilities that I need to be factoring in? Or is there anything below that I shouldn’t be including (I’m not sure about the Def Inc Tax, but removing it gets me even farther away from -194k)? Current Assets Change XXCash and cash equivalents (10,054) XXShort-term investments 178,450 Merchandise inventory (11,202) Accounts and note receivable (13,508) Prepaid expenses and other (23,567) Deferred income taxes 11,915 Current Liabilities Change Accounts payable 32,605 Accrued compensation and payroll taxes 36,798 Accrued rent 3,513 Accrued income and other taxes 80,741 Unredeemed gift cards and gift certificates 14,267 Current portion of deferred lease credits 46 Other liabilities and accrued expenses 1,389 Thanks!

ignore google and do your own calc. yahoo and google etc are good for general overiews, but much like bloomberg and others, they don’t always get calculations right.

Yeah, but the company says it should be -194,588 as well. Here’s something else I don’t get: Per the Company’s balance sheet from the 10-Q, the previous period’s A/P is 171,150, and the current period’s A/P is 138,545, for a difference of (32,605). But the statement of cash flows shows this: CFO Accounts payable (33,407) Why wouldn’t these match up exactly? Some of the other accounts are slightly off as well, but by different relative percentages. I know I’m missing something easy here.

I thought working capital is just current assets minus current liabilities. Doing it the way you described above would calculate the chnage on working capital. Is that what you are looking for?

Right, I need the change in working capital. Basically, I’m building a model of this company’s balance sheet, income statement, and statement of cash flows. I want the statement of cash flows to automatically calculate based on the inputs from the B/S and I/S. But I can’t get the working capital input to match up, which is throwing off my CFO.

Does it have something to do with reserves for uncollectable accounts in accounts receivables?

naturallight Wrote: ------------------------------------------------------- > Yeah, but the company says it should be -194,588 > as well. > > Here’s something else I don’t get: > > Per the Company’s balance sheet from the 10-Q, the > previous period’s A/P is 171,150, and the current > period’s A/P is 138,545, for a difference of > (32,605). > > But the statement of cash flows shows this: > > CFO > Accounts payable (33,407) > > > Why wouldn’t these match up exactly? Some of the > other accounts are slightly off as well, but by > different relative percentages. I know I’m missing > something easy here. If the company made any acquisitions during the year then the accounts may not reconcile.

For what you want to do, you are on the right track. use your formula’s going forward. but for historicals you take the statements. The historical statments won’t reconcile if you try to use formulas in your cash flow statement for a number of reasons including bad debt expectations, other reserve accounts, divestitures, acquisitions, securitizations, collection on accounts that were already written off etc. i wouldn’t worry about it rather input all the historicals and then move on to projections the way you sound like you already know how to do.

hedgefund06–wouldn’t those reserves be included in net A/R? they’d have to account for them somewhere on the b/s, right? tMurf–no acquisitions. strikershank–so that’s an acceptable practice? Sounds good to me. So when you guys build financial models, are you usually able to have the statement of cash flows pull directly from the I/S and B/S? That is, you don’t have any direct inputs on the statement of cash flows? If so, how do you deal with the CFI section–specifically with dividends, share buybacks, and options compensation? It’s looking to me like those will need to be direct inputs to make my model work.

First, working capital includes cash and equivalents. You’re not doing a cahs flow from ops calculation. I think some of your signs for changes in account balances are wrong up top. Do a quick calc: (CA-CL for year 1) - (CA-CL for year 2) See if that agrees with what the company says. And if its a public company tell us the name so we can figure out where the problem is.