medium · Private Equity & LBOs
A seller 're-orders' $5.0M of inventory just before closing using a rush delivery that won't arrive until after the buyer takes over.
If the invoice is included in 'Accounts Payable' at close, what is the net effect on the true-up?
- The $5.0M is treated as a 'Prepaid Expense'
- There is no effect because the asset and liability offset each other
- NWC is lower because liabilities rose without an offsetting asset, reducing the purchase price
- The purchase price increases because the buyer will get the inventory later
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