On pg 313 ( schweser - book 4), it says Short term debt and current portion of long term debt is included in net working capital calculation. But then on Pg 200 ( in FCFF calculations), its says net working capital is calculated excluding current portion of long term debt… I am so confused whether to include current portion of LT debt in calculation of net working capital… Please help
invested capital = Current Assets - Current Liabilities + Net PPE = NWC + Fixed Assets = Shareholders equity + Long Term debt 1luv
But then the book says that Cash & cash equivalents, notes payable ,current portions of ST & LT debt should be excluded… So the formula of directly taking current assets - current lia to calculate NWC will not work… Please explain…
thats what CFAI says as well as Schweser and im sticking to it where in the book duz it say that?
On pg 200 ( schweser - book 4)
thats teh Working Capital Investment item of the FCFF and FCFE valuatino models very very different from NWC
Amit_cfa2 I think what they mean on pg 313 is because: NWC = Current Assets - Non-interest bearing Current Liabilities …that invested captial includes interest-bearing liabilities, such as short-term debt and cp of long-term debt, because they have been excluded from the NWC equation. Invested Capital = NWC + Net Fixed Assets = Current Assets - Non-interest bearing liabilities + Interest Bearing Current Liabilities + Net Fixed Assets Then on page 200, they use the word excludes when talking about the NWC equation. So the confusion is that they are talking about two different equations, Invested Capital and NWC, and the effect of interest-bearing liabilities on each