WCInv

CFA Level II
#1

Hi, If we get a balance sheet and need to calculate WCInv, is it all current assets - liabilities (excluding cash, ST debt and current portion of LT debt)? Thanks, Soddy

#2

yep

#3

and thats current liabilities, not total liabilities. Thats probably what you meant anyway, though.

#4

thanks.

#5

Keep in mind on the liabilities side it is all interest bearing debt. That includes notes payable in case they want to play with the wording.

#6

not to confuse you but in Kaplan it is only changes in debtors, creditors and inventory. Could somebody please confirm? Thanks

#7

WCinv for FCF valuation (this includes FCFF and FCFE) does not consider noncash assets and nondebt liabilities (current, of course). Thus, for FCF valuation, it is: [(CA-cash/ce/stms)-(CL-STD/current portion LTD)] For Capital Budgeting it is just: CA-CL. I am referring to the change in working capital investments, of course. On another note, remember that FCinv is capex-sale of PP&E.