See Inputs and Balance Sheet for general instructions.

• Enter normal levels of trade-related Accounts Payable (A/P) required to generate the Adj. EBITDA. 
• Professional help may be required to determine normalized A/P if year-end A/P are influenced by tax/earnings motivations, or if A/P level fluctuates due to order size, uneven shipments, seasonality, unusual bonuses, non-trade items, etc. 
• For the future years, BVX calculates A/P in proportion to sales unless Advanced Features are used. Changes in A/P impact cash flow calculations.
• Buyer should assume A/P as part of the acquired operating balance sheet. If A/P are excluded from the operating balance sheet, buyer will have a post-acquisition positive cash flow as he builds up A/P, thus increasing his ROE. The benefit of this cash flow belongs to the seller who managed to get the suppliers to act as a source of free financing. Unfortunately, this issue has not been well debated in the valuation trade. 
• Often A/P are not included in the transaction. BVX After determining the Enterprise Value of the business with A/P included, the net to the seller can be adjusted if the buyer is not assuming them at closing. This approach will assure the seller higher net proceeds. Excluding A/P from valuation will undervalue the business. Such exclusion implies business does not have a source of free working capital. recommends including A/P in the valuation even if the buyer is not assuming them at closing. After determining the Enterprise Value of the business with A/P included, the net to the seller can be adjusted if the buyer is not assuming them at closing. This approach will assure the seller higher net proceeds. Excluding A/P from valuation will undervalue the business. Such exclusion implies business does not have a source of free working capital. 
• For businesses using cash basis accounting, A/P should be included in value determination. Business should be valued as if it is using accrual accounting.
• Customer deposits: Liabilities associated with customer deposits, pre-paid subscriptions, customer advances, etc. should be, added to the A/P cell and be assumed by the buyer provided specific assets of equal amount, required to fulfill the obligations under such liabilities, are included on the asset side.
• Accrued Expenses (A/E): A/E are liabilities for which the benefit accrued to the seller but the seller has not made payment for receiving such benefit. Valuation trade is not clear whether the buyer should assume A/E. It appears that in small businesses A/E remain with the seller, in large businesses the buyer assumes A/E. However, in small businesses the seller usually retains the Operating Cash, and in large businesses the buyer usually gets the Operating Cash. BVX recommends that the buyer should assume A/E only to the extent the buyer gets offsetting Operating Cash. This will have cash neutral impact on buyer?s cash flow. For BVX data entry, A/E should be added to the A/P cell. 
• In most cases buyer will not assume tax-related liabilities regardless of how they are classified.