Cash Free and Working Capital

searcher profile

February 24, 2026

by a searcher from Princeton University in Livingston, NJ 07039, USA

How do others structure their LOIs? Mine says cash free debt free but then includes a target amount of working capital. WC includes cash as a current asset. I understand the seller gets to keep excess cash but saying cash free feels wrong. Anyone have a solution?
1
5
29
Replies
5
commentor profile
Reply by a searcher
from Harvard University in San Francisco, CA, USA
Remove the word "all". Add something along the lines of "Target Working Capital will include operating assets and liabilities incurred in the ordinary course of business and will exclude (without limitation) unusual, out of period, or non-operating assets and liabilities. With the benefit of further due diligence, [we] will propose the specific working capital accounts and balances to be used in the calculation of Target Working Capital."
commentor profile
Reply by a searcher
from University of Michigan in Raleigh, NC, USA
What I've seen most common is cash free, debt free excludes cash as a current asset and excludes debt as a liability. When determining Net Working Capital, it will be along the lines of: (AR + Inventory + Prepaid Expenses) - AP & any other accrued expenses
commentor profile
+3 more replies.
Join the discussion