How did they calculate the investment in working capital?
Also the capital expenditure doesn’t seem to reconcile with the increase in fixed assets.
Could anyone please take a look?
So for the working capital investment you need to look at the change between 2008 working capital and 2007 working capital.
Working capital = current assets - cash - current liabilities
We don’t include cash as a working capital asset because it’s usually not part of the operations for the business.
Therefore 2008 working capital is 180. 2007 working capital is 139.
Working capital has increased 41 and represents a use of cash for the company (firm had to invest in working capital.)
Thank you very much! You are a life saver.