As the gentlemen put across above working capital is the capital that is required for running day to day operations. As you see there are two components, one is Capital and second is day to day operations.
What is day to day operations for IT company is not same for a steel company. An IT company employs thousands of people; hence their salary becomes a significant cost. In earlier days there was a debate among accountants, human capital should be capitalised. These days anything that is spend for building a software is capitalised. Now if we say building a software is not integral part of operations IT companies will shut down (at least many of them). Here monthly salary payables are nothing but nature of trade creditors. How you will take them out?
There is a category of companies which run on build, operate and transfer. They build asset, run for some time and transfer to another entity for maintenance. If you remove creditors for capex the business will suspend in first day.
In short working capital calculation will be influenced by nature of business.
The other side, if we are having an academic debate we can deduct this, add that one. Practically it is impossible for a retail share holder to do so. Here is why, take the case of creditor for capex.
- When a purchase order is placed, some systems like SAP mark the PO as capex PO. But lets us not assume every company runs on SAP.
- A vendor (what we call creditor) later is not marked as capex vendor or opex vendor. That will be faulty argument, same vendor could be supplying under both categories.
- Capitalisation takes place once the goods is received. Here item is capitalised and liability is created. But there is no mandatory disclosure requirement ( to my knowledge, you update me ) to differentiate between capex and opex.
Of course, as internal data ; management prepares all these details. Because they want to know several KPIs like payback/ROA, CCC etc. But that’s part of management accounting. Management accounting does not require statutory disclosures.
In absence of access to data, system, accounting entity (cost canter) it becomes a daunting task, also benefits are questionable.
Excess cash- yes, excess cash should be taken out. But how do we know what excess cash is. I saw in Greenwald’s book 1% of sales in cash required. That’s too dicey. Cash requirement will vary from company to company depending on their cash conversion cycle, regulatory requirements, organisation structure (like FMCG where you are spread-out than a back office which is centralised) and so on.
If you are looking for investing purpose I suggest stick to financial numbers published. I would strongly suggest adjust notes to accounts but they are published regularly as well. Running a management accounting by an individual outside the system is hallucination though academically seductive.