Quick Theory Question. EV Calc with Trade Receivables.

[Laxputs]

When doing an EV calculation, cash on the balance sheet can be significant. I'm looking at a company that has a large difference between trade receivables and trade payables. The company gets paid before they provide services/deliver goods so they don't need much cash to run the biz.  Can I net out the difference between the two and add that to Cash for my EV calc?

 

TIA

[jschembs]

IMO depends on the ongoing nature of that relationship. If A/R needs to stay that high as a result of their customer payment patterns, I wouldn't count that as cash. If it's more one-time in nature, perhaps that's a reasonable approach.

[Guest wellmont]

if you think the company is going to liquidate. otherwise no imo.