Column Update: The Essence of Working Capital Adjustment in Corporate Valuation - What Cannot Be Measured by NOPLAT Alone

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In the practice of corporate valuation, have you ever faced the question, "Why is there profit but no cash remaining?" The adjustment of working capital from NOPLAT in the DCF method is often treated merely as a calculation rule, but it is actually an important process related to the essence of corporate valuation. This column not only explains the calculation procedures but also focuses on the fundamental question of "why this adjustment is necessary." Specifically, it visualizes through numerical examples the mechanism by which "accounting profit" increases while "cash" decreases during sales expansion, and it also discusses the risk of overvaluation that is easy to fall into when evaluating growth companies. The working capital adjustment is not just a technique; it is a "philosophy" for reflecting the actual business situation in value. This is content that practitioners aiming to enhance the accuracy of their DCF models and achieve persuasive valuations should definitely read.

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