Investment, Coding and Actuary

Getting better day by day…


Leave a comment

Working, working, working Capital!

The Working Capital, as is commonly known as “the capital that actually gets to work” (James, 2014), is simply the current assets minus current liabilities.

It’s the best way to judge how much a company has in liquid assets to build its business, fund its growth, and produce shareholder value.

We can divide Working Capital by the market capitalization (outstanding shares * share price – long-term debt – preferred shares). If the ratios is greater than 50% then the company is in great shape. However for some retailers it is better to take inventories from working cap before doing the ratio.