krause2

In forecasting NWC.
1. Nominal NWC = % of Nominal Revenue
2. Nominal investment in NWC = Change in Nominal NWC
3. Real NWC = % of real Revenue
4. Real investment in NWC= Nominal investment in NWC discounted with inflation index.
Common mistake is to do Real investment in NWC = Change in Real NWC.
Real investment in NWC is higher since it must in addition compensate for loss of real spending power of existing NWC (compared to last year)