financial-metrics
Working capital is the operating balance sheet: typically current operating assets minus current operating liabilities. In deals it is the cash tied up in receivables, inventory and payables that must be normalised at closing.
Textbook working capital is current assets minus current liabilities. Deal practice is stricter: operating net working capital (NWC) usually excludes cash and excludes interest-bearing debt and equivalents (those live in net debt).
A standard operating definition:
NWC = Trade receivables + Inventory + other operating CA − Trade payables − other operating CL
An increase in NWC is a use of cash. That is why it appears with a minus sign in free cash flow.
Illustration only. Hypothetical importer, month-end snapshots.
| Nov | Dec (close) | Jan | |
|---|---|---|---|
| Receivables | €4.8m | €6.1m | €5.0m |
| Inventory | €3.2m | €3.4m | €3.3m |
| Payables | €2.9m | €2.5m | €2.8m |
| Operating NWC | €5.1m | €7.0m | €5.5m |
If the SPA sets a working-capital peg at the twelve-month average of €5.4m and the deal is a completion accounts deal, a 31 December close hands the seller a price chip of roughly €1.6m unless the peg was seasonally adjusted. That is not a rounding error; it is the deal.
Days sales outstanding, days inventory, days payables (the cash-conversion cycle) explain the level. Growth in revenue without a NWC policy is a silent cash drain. Negative NWC (payables funding the book) is valuable until suppliers reprice terms after a change of control.
Purchase price adjustment; locked box leakage schedules; lender borrowing bases; DCF ΔNWC.
What counts as “operating” is negotiated (VAT, factoring, customer deposits, deferred revenue, provisions). IFRS current/non-current split does not equal the SPA definition. Seasonality makes a single-date snapshot misleading.
Dazur stores a monthly NWC bridge with an explicit included-items list so the working capital adjustment and the valuation model cannot use two different balance sheets.