Great questions. The business is usually valued based on adjusted EBITDA. If you are paying full market price for the business, you should be getting normalized working capital with the acquisition, which would include inventory and A/R sufficient to operate. You cannot factor the A/R and inventory in the deal separately because you are likely to have a purchase price that will not be supported by cash flow. Now if the seller is willing to give you the business for a discounted price, then you might be expected to bring your own working capital to the table. But with $300,000 in EBITDA there is not enough cash flow to support both.

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So as Brad has mentioned, the business is typically valued using a multiple of adjusted EBITDA. Working capital is not a direct add or subtract from the PP, but rather you set a peg for a normalized level and adjust the PP at closing for the working capital that is delivered above or below that peg.

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