LBO Modelling

Question 1

DSO =?

Answer 1

Days sales o/s
Avg 90 day AR / sum of 90 day sales * 90

Question 2

DPO=?

Answer 2

Days payable o/s
Avg 90 day AP / sum of 90 day COGS * 90

Question 3

DOH=?

Answer 3

Days on hand
Avg 90 day inventory / sum of 90 day COGS * 90

Question 4

Accrued expenses as % of sales=?

Answer 4

Avg accrued expenses over 90 days / sales of that month only

Question 5

Prepaid expenses as % of sales=?

Answer 5

Avg prepaid expenses over 90 days / sales of that month only

Question 6

Net working capital ratio=?

Answer 6

How many turns does non cash current assets cover current liab

Sum(AR, prepaids, inventory)/ sum(AP, accrued expenses)

Question 7

Pros and cons of Nwc coverage ratio

Answer 7

Pro: shows the ST ability to continue operations (how many times non cash current assets covers current liab)

Con: doesn’t give insight Status of the current assets or liabilities. For example, the likelihood of collecting on AR 

Question 8

Inventory turnover LTM=?

Answer 8

How many times inventory is turned over in LTM
= sum COGS / avg inventory