As the title adequately lays out, I am having an issue with understanding the change in Net Working Capital when setting up, for example, a DCF model. Often, a company will break out its Deferred Revenue into short-term and long-term portions on its BS, making it that much more confusing to input into your FCF computations. This is because the conventional wisdom says that Changes in Net Working Capital that must be removed (subtracted) are simply derived by looking at changes in Current Assets and Current Liabilities. So, the question is, do you also look at changes in Long Term Deferred Revenue and factor that in as a change to the NWC? (I have seen it done both ways - I am just looking for consistency/mindfulness in the approach in either which way)
Anticipating your thoughtful responses. Thank you.