In this step, we compute net working capital, or NWC, which is the difference between non-cash current assets and non-debt current liabilities. The components of net working capital are often projected as percentages of sales or COGS, as we have projected them in our model. The accounts receivable days, accounts payable days, inventory days, and inventory turnover shown here are imputed. Alternatively, you could drive inventory projections from an assumed inventory days, and then impute the inventory/COGS ratio, for example. For simplicity, we assume that these ratios are flat over the projection period. In reality, these drivers could reflect seasonality, increasing leverage in the supply chain, etc.
