Working Capital

Overview

The Working Capital schedule tracks short-term operating assets and liabilities used in the company’s day-to-day operations. It plays a critical role in liquidity, operational efficiency, and cash flow management.

Working Capital is typically defined as:
Working Capital = Current Operating Assets – Current Operating Liabilities

The Working Capital schedule is composed of 10 key components, categorized into assets and liabilities.

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Working Capital Assets

• Receivables
  Amounts owed to the company by customers for goods or services already delivered. A key driver of cash conversion and liquidity.

• Inventories
  Value of raw materials, work-in-progress, and finished goods held for sale. Tied directly to production and sales capacity.

• Prepaid Expenses
  Payments made in advance for future goods/services (e.g., insurance, rent). These reduce future cash outflows but are short-term non-cash assets.

• Tax Receivables
  Refunds or credits owed to the company by tax authorities (e.g., from overpayment or loss carryforwards).

• Other Working Capital Assets
  Miscellaneous items not captured above (e.g., employee advances, deposits made to suppliers).

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Working Capital Liabilities

• Payables
  Amounts owed to suppliers for goods/services already received. Extending payables improves cash flow but affects supplier relationships.

• Accrued Expenses
  Expenses incurred but not yet paid or invoiced (e.g., wages, utilities). Recognized under accrual accounting principles.

• Deferred Revenue
  Cash received in advance of delivering goods or services. Recognized as revenue only when earned.

• Tax Payables
  Obligations owed to tax authorities (e.g., income tax, sales tax, payroll tax).

• Other Working Capital Liabilities
  Miscellaneous short-term obligations (e.g., customer deposits, legal reserves, short-term provisions).

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Model Flow

[NTD: Insert flow chart visualizing WC integration across Balance Sheet and Cash Flow]

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Adding a module

To add or edit a working capital item in NorthStella, select one of the following nodes in the Blueprint window:

• Schedule → Working Capital → Assets → {Item}
• Schedule → Working Capital → Liabilities → {Item}
• Balance Sheet → Assets → {Item}
• Balance Sheet → Liabilities → {Item}

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Editable Properties

Name

The display name appears in the Working Capital schedule, Balance Sheet, and Cash Flow Statement (indirect method).
See Display Name for more details.

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Forecasting Method

Each working capital item can be forecasted using the following methods:

• Hardcoded Input
• Nil
• Last Historical
• Growth Rate
• Ratio

  Ratios can be expressed as a percentage, number of days, or multiple—depending on item type.

Default Forecasting Methods:

Item	Default Driver
Receivables	Ratio (% of Revenue)
Inventories	Ratio (% of Revenue)
Prepaid Expenses	Ratio (% of Revenue)
Tax Receivables	Ratio (% of Revenue)
Other WC Assets	Ratio (% of Revenue)
Payables	Ratio (% of Cost of Revenue)
Accrued Expenses	Ratio (% of Opex)
Deferred Revenue	Ratio (% of Revenue)
Tax Payables	Ratio (% of Revenue)
Other WC Liabilities	Ratio (% of Revenue)

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Additional Materials

See Working Capital 101 page for more details.