Net Working Capital in Plain English - Complete Guide (2021)
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- เผยแพร่เมื่อ 5 มิ.ย. 2024
- Net Working Capital is a topic that causes lots of confusion….but it doesn’t need to be complicated. In this video, we offer a simple visual, and plain English explanation of Net Working Capital. Watch this video so you can nail your interview and land the job!
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This video can help you answer common interview questions like:
-What is Net Working Capital in Plain English?
-What is the definition of Net Working Capital?
-What are Current Assets?
-What are Current Liabilities?
-What are Accounts Receivable, Inventory and Prepaid Expenses?
-What are Accounts Payable, Accrued Liabilities, and Deferred Revenue?
-What is the impact to cash from Positive Net Working Capital?
-What is the impact to cash if a business has significant Deferred Revenue?
Learn how to answer interview questions from a former Investment Banking (UBS LA), Private Equity (Golden Gate Capital + HIG Capital) and Investment Management ($200B Mutual Fund / $2B Hedge Fund) practitioner…and Adjunct Professor in Columbia Business School’s Value Investing Program who has trained thousands of current IB/PE/HF/MF professionals.
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Contents:
00:00 - Intro
00:35 - What is Net Working Capital?
01:50 - What are Current Assets?
03:40 - What are Current Liabilities?
05:10 - Simple Net Working Capital Explanation: Pizza Shop
08:24 - Working Capital Impact: Current Assets vs Current Liabilities
09:55 - Big Picture Net Working Capital Example: Growing Business
11:56 - Big Picture Net Working Capital Example: Declining Business
13:17 - Net Working Capital Recap
Hope this is helpful and let us know if you have any questions in the comment section below.
#NetWorkingCapital #WorkingCapital #InvestmentBanking #HedgeFunds #FinanceInterviews #DCF
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The plain English thing along with the Business owner interpretation is what made this video stand out
We really try to make our videos as clear and practical as possible. Glad you found this helpful!
I am from India. Preparing for CA inter. I like practical explanation
Grateful. What an explanation. Finally I found sense. You are the only one who made overall sense finally. Thank thanks thanks. Outstanding tutor indeed.
Really glad you found it helpful!
You should be replacing my teachers....and as a student...I feel you are God sent
thanks to you I understood NWC and cash flows. really appreciated the time you spent in this
Glad to hear that!
Great job! You're doing something very different to everyone else with these very intuitive explanations. Fantastic!
Glad you found this helpful!
Amazing way to explain this tricky topic!! Thank you
Absolutely perfect, nailed it down to the main idea in a few minutes!
Glad you found it helpful!
This was so helpful. Thanks man!
Glad you found it helpful!
Such a detailed and simple explanation! Thank you !
Glad you liked it!
well explained! Thank you for sharing the video
Thanks so much and glad it was helpful!
Very coherent and intelligible, well explained. Thank you!
Glad it was helpful!
Great info!
Glad it was helpful!
what a legend. Thanks for existing🙏
Thanks so much! Glad it was helpful!
Outstanding!
Thank you! Glad it was helpful!
Very well explained!
Glad it was helpful!
Perfect preparation for my interview! Thanks a lot
Glad it was helpful!
Super helpful many thanks
Glad to hear it!
Excellent explanation of NWC!
Thank you kindly!
Brilliant video. The explanation you provided is much greater than the university education I'm paying $1,000's/year for.
Thank you for the kind words Bruce!
Nicely explained
Thank you so much 🙂
thanks from saudi
Welcome
Solid video
Thanks Jacob!
You should create a book explaining finance/businesses formulas!
Really appreciate the suggestion. That would actually be a lot of fun!
Great Video. Why do you need money to cover your A/R? That is money that is owed to us
Hey Shivasai, sorry for the delayed response here. It's not that you are using money to 'cover' A/R. But rather, that when you make a sale and the customer doesn't pay, then the Cash from that sale is 'locked up' / 'used' until the Customer pays.
When you say net assets say for instance I started a print on demand business and there's a certain amount of quantity that are available for sale per product does that count
Sorry if my english is not good, but i want to ask a question, do the equation of non cash current asset minus current liabilities include on that both interest bearing and not interest bearing current liabilities?
Hi there, we generally exclude any 'interest bearing' items when calculating Working Capital.
I did not understand how assets and liabilities got doubled when you doubled the revenue, can you explain that? thanks for answering .
Hi there, we are simply assuming that NWC grows/declines in proportion to Revenue. This is a bit of a simplification to make the concept more clear, but broadly speaking as a Business grows, the various components of working capital will likely grow roughly in proportion to the Revenue of the Business. Clearly though, you will find many exceptions to this in a real life Business.
I love u
I thought having more assets than liabilities is a good thing no?
You’re not entirely wrong here. However, in order to acquire assets, you have to put out money in most cases. And so if you can manage the liabilities appropriately, they can actually pre-fund the purchase of some assets. Check out our negative net working capital video for more on this
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