Working Capital Analysis
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We assess the accuracy of Management’s projections and working capital requirements by analyzing the reasonableness of their assertions, any impact in changes to key assumptions, the timing and the quality of projected future revenue streams and their plans to support future business operations. We provide support based on our findings and assist our clients’ legal advisors in drafting financial and accounting sections of the purchase, sale or debt agreement in a refinancing or acquisition.
Our analysis may include procedures such as:
- Analyzing historical trends and discussing significant fluctuations and the impact of non-recurring items included within current and prior reporting periods (i.e., Quality of Earnings)
- Understanding the Target’s accounting policies and consistency in the application of GAAP to determine if changes will impact working capital
- Assessing the propriety of assets
- Assessing contractual arrangements impact on the financial statements, particularly key customer and vendor agreements
- Inquiring as to contingent liabilities, off-balance sheet items and related party transactions
- Analyzing cyclicality of the Target’s business and assessing working capital needs based on quality of cash flows
- Analyzing deferred revenue to better position our clients for negotiations on cash to be left in the business at closing
- Assisting in setting the working capital requirements
- Understanding required maintenance and expansion Capital Expenditures
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