Re: Current Liabilities
Yes, for purposes of calculating working capital from the finance perspective, we would definitely exclude cash from Current Assets and debt related items from Current Liabilities. Keep in mind that the Accounting definition would have us do a straight Current Assets / Current Liabilities.

Re: Off-balance sheet Inventory Financing
Continuing on the discussion below, the supplier will legally and economically own those inventory. So its capital of the supplier and the repayment of the principal will not come from EBITDA / cash flow but from selling those inventory. So we will just pay interest but not the principal ever. So in... Continuing on the discussion below, the supplier will legally and economically own those inventory. So its capital of the supplier and the repayment of the principal will not come from EBITDA / cash flow but from selling those inventory. So we will just pay interest but not the principal ever. So in calculating Terminal Value of the Project IRR at year 10 for example, the principal liability is matched with inventory and not with cash flow. So it should be excluded from Project IRR calculation. right or wrong? Read More

Re: TEV
Let me illustrate with numbers. agreed equity Value = 500 debt = 80 minority interest = 20 Current Assets = 400 less: Current Liabilities = 200 (Actual) Net Working Capital = 200 less: agreed required Net Working Capital =50 excess working capital (treated as excess cash and deemed as ... Let me illustrate with numbers.

agreed equity Value = 500
debt = 80
minority interest = 20

Current Assets = 400
less: Current Liabilities = 200
(Actual) Net Working Capital = 200

less: agreed required Net Working Capital =50
excess working capital (treated as excess cash and deemed as re-invested back into the company) = 150

Thus, TEV = 80 + 20 + 500 - 150 - 50
TEV = 400

Correct? Read More

Re: TEV
I understand the standard formula. But would the modified formula below I mentioned be logical? TEV = Debt + Equity + Minority less an agreed normal net working capital less excess cash and any excess of actual net working capital from normal net working capital is treated as excess cash The... I understand the standard formula. But would the modified formula below I mentioned be logical?

TEV = Debt + Equity + Minority less an agreed normal net working capital less excess cash
and any excess of actual net working capital from normal net working capital is treated as excess cash

The argument is that since TEV is derived from EBITDA using a multiple and we all know that EBITDA is a P&L measure and does not takes into account the net working capital flow needed to generate that EBITDA /cash flow, then a "normal" net working capital should be added on top of this TEV to get the "true" market. What do you think?

Although I can understand that one could argue the other side, and say that TEV include working capital already since it should be the "value" of the business operating on a going concern principle. So only non-operating assets are added on top like excess cash which is the standard concept like you mentioned and I do agree with this view. Read More

TEV
Is this a good formula? Cash or Normal net working capital + Enterprise Value + Non-operating assets = Long-term liabilities or long-term Debt + Minority Interest + Equity + Non-operating liabilities + unfunded pension liabilities + preferred shares wherein: "Normal" net working capital = Curren... Is this a good formula?
Cash or Normal net working capital + Enterprise Value + Non-operating assets = Long-term liabilities or long-term Debt + Minority Interest + Equity + Non-operating liabilities + unfunded pension liabilities + preferred shares
wherein:
"Normal" net working capital = Current Assets Less Current Liabilities

What is included in the definition of long-term liabilities? Do you include items like asset retirement obligations, deferred tax liabilities, advances from shareholders, other non-current liabilities (but is not debt)? Read More