Computations
Balance Sheet
The net working capital standard on page 1 of the Operating Report represents the minimum amount of net working capital needed to sustain satisfactory operation of the business. This net working capital standard is part of the contractual agreement between the dealership and the manufacturer and is established annually based on the dealer’s method of operation and data shown on the operating reports for a 12-month period. The determinants are:
An average month’s expenses excluding depreciation and amortization
An average month’s parts and service customer receivables
An average month’s cost of used vehicles sold retail (Note: If any used vehicles are on floorplan, the amount of the note payable (Account 311, Notes Payable – Used Vehicles) will be subtracted from the used vehicle component, but only up to a maximum of 30% of the average's monthly cost.)
An average 2.4 months’ cost of sales for parts and accessories sold
An average month’s balance for factory receivables
An average month’s cost of warranty claim sales