The contract page is working-capital peg and true-up. The buyer underwrite is peg explained for buyers. Inventory in valuation is the pricing essay. This URL is the teaching calculator.
How does the worksheet class inventory?
Step 1. Enter eligible accounts receivable after ineligible and related-party kicks.
Step 2. Enter raw by commodity and age. Dead inserts and leftover alloy from a cancelled program are not “average inventory.”
Step 3. Enter WIP by job and by a cost-to-complete rule a successor can finish without the seller standing at the machine — not the quoted margin on the acknowledgment.
Step 4. Enter finished goods as shippable units not on a quality hold.
Step 5. Subtract AP that is actually trade payables for those classes. Subtract customer deposits if progress bills created them.
Step 6. The spec’s illustrative identity is eligible AR + eligible inventory − eligible AP, after E&O and title kicks, often as a trailing-twelve average. Seasonality can replace a naive average. Say which chart you used before you see who it favors.
Inventory count at closing is the physical. The calculator without a signed cutoff is scenery.
What teaching table belongs on this page?
Label: illustrative class map, not your cage and not a quote.
| Class | What to include | What to kick | Why it fights |
|---|---|---|---|
| Eligible AR | Trade receivables that will collect | Related-party, disputed, cross-aged | Collectability and the whale |
| Raw | Commodity you can still issue to a job | Obsolete alloy, customer-owned resin | Dead programs look like stock |
| WIP | Finishable cost on open jobs | Quoted-margin hope, unbilled first article treated as inventory | Job-cost files lie here |
| Finished | Shippable, not on hold | Obsolete revisions, consigned at a dock you do not own | Returns and quality holds |
| Tools / fixtures | Only if title is the company’s and they are inventory under the definition | Customer-owned molds, bailment | Title, not “it was on the shelf” |
| AP / deposits | Trade AP against those classes; deposits if POC | Owner’s personal cards, intercompany | Simple three-line formulas hide OEM cycles |
ABL advance-rate folklore — often discussed as 70–85% of eligible AR and 40–60% of eligible inventory, lower on WIP — is market practice for monthly availability. It is not the peg. This worksheet will not pretend a revolver test is a purchase-price target.
What sourced facts sit next to the arithmetic?
Main Street manufacturing in BizBuySell’s 2021–2025 set cleared at 2.75x median SDE on about $268k of discretionary earnings (Source: BizBuySell / Iconic). On an sde-under-1m file, a $75,000 eligibility miss is not a rounding error. Stanford’s 2024–25 search median of about $16 million at ~6.2x EBITDA on a ~25% margin company is a different neighborhood (Source: Stanford GSB). A clean peg does not mint that multiple. It still saves cash.
SBA 7(a) still caps at $5 million with a 10% injection (Source: SBA). Neither 7(a) nor 504 reprints a light cage. Combined 7(a)+504 can reach $10 million for fitting borrowers (Source: SBA). The true-up is still a wire.
Purchase-price allocation and Form 8594 usually parks inventory in Class IV on an applicable asset deal (Source: IRS). The peg dollars and the 8594 inventory line should tell the same story. They will not if one side is still using a retailer leftover.
BizBuySell’s 2025 manufacturing median close ran 223 days (Source: BizBuySell). Spend some of those days sampling lots before you freeze a number.
What does an illustrative true-up look like when classes are honest?
Illustrative only — not a listing. Trailing-12 eligible AR $540,000. Inventory book $690,000. E&O $85,000. Customer-owned resin and fixtures $62,000. WIP hope restated down $30,000. Eligible inventory $513,000. Eligible AP $210,000. Peg ≈ $843,000. Close physical delivers $768,000. Seller is $75,000 light. That light delivery is cash. The spec’s output is the arithmetic and the reminder that accountants, not this page, sign the certificate.
Selling with excess inventory is the seller companion when the cage is fat. Buy a manufacturing business is the buyer pillar when the cage is a kill sheet.
IBBA Pulse Q1 2026 still showed majority cash at close, with notes appearing on gated files (Source: IBBA). A peg miss is how that cash shrinks after the handshake.
What the spec will not invent
The spec will not invent a universal “days of inventory” law. It will not copy a restaurant definition onto job-cost WIP. It will not treat customer-owned steel as the seller’s stock because it was on the floor. It will not use ISM’s August 2026 PMI of 54.6 or Fed utilization of 76.0% as a peg adder (Source: ISM; Fed G.17). Climate is climate.
Census CBP 2023 counted 284,452 plants, 68.4% under 20 employees (Source: Census CBP). Most of those shops can name three inventory classes. They should. A single cell is how the last argument of the deal gets donated.
Educational information only. Sourced climate figures are not your cage. Jason Taken is a business broker with HedgeStone Business Advisors. He will not sign the true-up certificate. The conversion path is a confidential intro call.