Net working capital=non-cash current assets-non-debt current liabilities I know that accounts receivable is working capital because it’s a non-cash asset. But isn’t accounts payable a short-term debt? I always assumed accounts payable was the evil twin (i.e., polar opposite) of accounts receivable.
YES IT IS.
To add on. you include the evil twin as you call it, in the Working capital. so now why would you leave out one who is eviller…
You guys are soooooooooo awesome and prompt.
sorry thought you were asking who you leave out.
wait wait so you leave OUT notes payable, i.e., you don’t include it in working capital?
notes payable is typically interest-bearing, making it a financial liability rather than operating liability
In practice, I leave out notes payable since it’s debt. I’m pretty sure cfai would instruct to do the same
oh ok. so accounts receivable and accounts payable are working capital, but notes payable and notes receivable are not?
I would not take notes payable and receivable as working capital from the definition, working capital is non cash current asset, while working liability is non debt current liability.
Short term debt, like notes payable, and current portion of LT debt are not included.
Can someone give a final confiration about the following 2 things. 1. AR and AP are WC accounts 2. NP and NR are not a WC accounts
AR and AP are WC. NP, I have heard of. But Notes Receivable is not something I have seen too often. If there is something like NR, NP and NR would constitute debt, and hence would not be part of WCInv.
definitely leave out NP from WCinv–i did a qbank vignette problem on this from ss 12 the other day and it was left out