Anyone else struggle with this? Unless it’s given, it makes FCFE or FCFF type questions seem impossible to me, because looking at a set of balance sheets, I can never figure out the change in net working capital. Any tips??? Anything to help me understand what it really is?
Work out WC for the year you want to know the FCFs for and the prior year. WC = CA - CL Exclude cash and equivalents from CA and exclude notes payable and current portion of LTD from CL. Change in working capital = This years WC - prior years WC. Do it a couple of times and you’ll get it. If I remember, there’s a vignette style q at the end of the FCF valuation chapter in equity where you can see this.