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Got stuck during an interview - Working capital reduction

Anonymous A

Hi guys,

as mentioned in the title, I was asked to solve a small case during an interview and I got stuck.

I don't think the case/question itself was complex, I completly blame my lack of preparation.

I will really appreciate it if you can help me crack it.

Input: In a project through which the working capital of a BU needs to be reduced by 100 M Euro over the next 2 years, the focus sould be on inventory of receivables. A teamn of an international global employees working within this BU from different countries was built to propose an action plan, in order to reach this goal.

Question: came up with a concret plan and steps tp do so? how would you proceed?

Thank you for helping out!

replied on 12/04/2017
Experienced McKinsey consultant

Simply accounting question.

Working capital = current asset - current liabilities

Working capital = long-term liabilities + equity - fixed assets

Try to understand where the main value sources are at the moment (what is the value of each balance sheet line). And then assess which one you easily can shrink. May be different alternatives. And then you need to understand how much resources you need (both time & cash) to make it happen.

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