Financial Modeling
Forecast reinvestment needs
What you will learn
Tie capex and operating working capital to the assumptions that drive growth.
Net reinvestment = capex − depreciation + increase in operating working capital
Separate maintenance needs from expansion spending where evidence supports the split. Build asset and depreciation schedules with consistent timing. Forecast operating working capital using turnover or days drivers. Stress the implied reinvestment required to sustain growth in the terminal period. A fictional factory spends ₹14 crore, records ₹6 crore depreciation and adds ₹3 crore working capital. Net reinvestment is ₹11 crore.
A fictional factory spends ₹14 crore, records ₹6 crore depreciation and adds ₹3 crore working capital. Net reinvestment is ₹11 crore.
Separate maintenance needs from expansion spending where evidence supports the split. Build asset and depreciation schedules with consistent timing. Forecast operating working capital using turnover or days drivers. Stress the implied reinvestment required to sustain growth in the terminal period. A fictional factory spends ₹14 crore, records ₹6 crore depreciation and adds ₹3 crore working capital. Net reinvestment is ₹11 crore.
Does depreciation automatically equal future maintenance capex?