How to Calculate Incremental Working Capital

The calculation of working capital initially requires knowing the income.

Working capital table

This will look something like this:

income statement

Just make the Working Capital Table, which looks like this:

working capital

Click on a cell beside Required Cash (1), and multiply B4 by 0,02 (2).

Required Cash

Click beside account receivable (on the working capital table) (1), and type the same value in the income statement (2).

account receivable

Note: Repeat this step for inventory and other current assets.

Net Working Capital calculations

Click beside current operating assets (1) and type =SUM(B3:B6) (2), to calculate it.

current operating assets

Note: Repeat step three for accounts payable, accrued expenses, royalties, and other accrued liabilities (put the same value that is in the income statement in Working Capital), and use step four to calculate other operating liabilities = SUM (E9:E12).

Click beside Net Working Capital (1), and type =E7-E13 (2).

Net Working Capital

Note: Under this step, you should put the result on the net networking capital.

Click beside the incremental working capital (1) and minus the networking capital of the year from the previous one (2).

incremental working capital

Click beside the sales (1), and put the same value beside the net sales (2).

working capital sales

Click beside sales increment (1), and minus this year's sales from the previous one (2).

sales increment

Click beside incremental working capital (1), then divide incremental working capital with the incremental sales (2).

incremental working capital percent

Note: You can now change the format to percentage. By right clicking on the result, choosing format cells, then choosing percentage, and clicking OK.

In conclusion, we have calculated both gross working capital, and net working capital in this calculation.