When I think about working capital, and in turn WCInv, the term used in the FCFF & FCFE formulas, I always think about the change in current assets and current liabilities. But it seems like the calculation of WCInv excludes changes in cash, and ST debt. Any other current assets/liabilities excluded from the WCInv calculation?
no that i know of, and they are excluded for a reasons that make sense… explaining why the STD is excluded is easy, the cash a little bit more difficult to explain but it aint that bad, let us know if you fail to see why they are excluded.
FCF is a cash flow measure, and WC is for non-cash operating items. It’s used to adjust NI to account for the disparity.
also remember you are valuing a company based on FCFE/FCFF. (for a potential takeover). any cash present on the company’s books becomes yours already. only anything other than cash would be used for valuation.