Valuation Terms

Net Working Capital

A deal-specific measure of working capital that often affects the final purchase price. Why it matters: Net working capital targets are often negotiated and can increase or decrease the final proceeds if actual working capital is above or below the agreed level.

Related terms

Working Capital

The short-term money needed to run the business, usually current assets minus current liabilities. Why it matters: Buyers expect enough working capital to be left in the business at closing so operations can continue normally without an immediate cash shortfall.

Purchase Price

The amount the buyer agrees to pay for the business. Why it matters: Purchase price only tells part of the story; timing of payment, seller notes, earnouts, rollover equity, escrows, and taxes can change the real value of the offer.

More from Valuation Terms

Add-Backs Adjusted EBITDA CapEx Cash Flow EBITDA Enterprise Value Equity Value Free Cash Flow Gross Margin Gross Profit Multiple Net Income

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