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Working Capital: The Impact of WC on a growing company
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BASELINE
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EBITDA$500,000
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Negative WCLow WCHigh WC
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Company ACompany BCompany C
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Cash $ 100,000 $ 100,000 $ 100,000
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AR $ 150,000 $ 150,000 $ 950,000
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Inventory $ 50,000 $ 100,000 $ 600,000
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Current Assets $ 300,000 $ 350,000 $ 1,650,000
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Deferred Revenue $ 200,000 $ -
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AP $ 150,000 $ 150,000 $ 150,000
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Current Liabilities $ 350,000 $ 150,000 $ 150,000
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Working Capital $ (50,000) $ 200,000 $ 1,500,000
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Less Cash $ 100,000 $ 100,000 $ 100,000
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Net Working Capital $ (150,000) $ 100,000 $ 1,400,000
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THE COMPANY GROWS 50% (REV + EBITDA)
50%
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EBITDA after growth $ 750,000
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(All WC accounts also go up by 50%)
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Negative WCLow WCHigh WC
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Company ACompany BCompany C
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Cash $ 150,000 $ 150,000 $ 150,000
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AR $ 225,000 $ 225,000 $ 1,425,000
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Inventory $ 75,000 $ 150,000 $ 900,000
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Current Assets $ 450,000 $ 525,000 $ 2,475,000
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Deferred Revenue $ 300,000 $ - $ -
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AP $ 225,000 $ 225,000 $ 225,000
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Current Liabilities $ 525,000 $ 225,000 $ 225,000
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Working Capital $ (75,000) $ 300,000 $ 2,250,000
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Less Cash $ 150,000 $ 150,000 $ 150,000
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Net Working Capital $ (225,000) $ 150,000 $ 2,100,000
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(Increase)/Decrease in WC $ 75,000 $ (50,000) $ (700,000)
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Increase in EBITDA $ 250,000 $ 250,000 $ 250,000
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EBITDA + (Increase)/Decrease in WC
 $ 325,000 $ 200,000 $ (450,000)
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