Closing mechanics
Working Capital
Working capital determines whether the buyer receives a normally funded operating business or must inject additional cash immediately after closing.
Buyer lens
Use monthly history and operating reality to establish normal working capital rather than accepting one balance-sheet date.
Seller lens
Prepare clean working-capital history before the peg becomes a late-stage negotiation.
Why it matters
- A profitable company can still consume substantial operating cash.
- Seasonality and growth can distort a single month-end snapshot.
- AR, inventory, AP, accrued expenses and deferred revenue need transaction-specific definitions.
Evidence to reconcile
- Monthly balance sheets
- AR/AP aging
- Inventory history
- Accrued liabilities
- Historical cash conversion