Good morning:
I have a question for you guys regarding to working capital calculation, and it is: Should I adjust the receivables with the valuation of receivables from P&L, in order to know the real cashflow? the easiest approach is current assets minus current liabilities, nevertheless I think you have to adjust the receivables. for example, when the revenue drops from one month to another, your receivables could go down, not necessarily, but you could interpretate that you have an increase in your cash coming from the collection, which could not be the case, could be for example that you had a lower revenue therefore lower credit sales. That is why I believe we need to adjust the receivables and isolate what we really are collecting or not. Thanks for reading