Working Capital
Select Equity |
Working Capital | = | Current Assets | - | Current Liabilities |
Working Capital In A Nutshell
Typically you want to see a company have a higher working capital number because that means the liabilities are not weighing the company down as much as it could. There are many avenues you can take this particular number and equations, so let us pick it apart and find what you may want to be looking for.
Working capital is the current assets minus the current liabilities, and this number can be both positive or negative depending on the numbers populated in the equations. It is important to understand what goes into these types of formulas because you can then begin to pick it apart and pinpoint what causes the final number and that can potentially unearth different issues with a company.
Closer Look at Working Capital
First are current assets and an asset is anything the company is using to generate revenue or house the business. Assets are the same across some industries, but typically they differ from company to company. A manufacturing firm will have different assets compared to a start up in Silicon Valley. When researching the assets, you want to know if they are in good working order and could potentially be liquidated in the event of a bankruptcy or financial distress.
Second are current liabilities and this encompasses the debt in a company, both long term and short term. If you look at debt, you want to understand why the debt is there in the first place. A reason could be the company is growing a needed the funds to purchase more assets and that is an acceptable answer. What you do not want is the company getting loans to pay off existing debt holders because that can signal a cash flow problem, which could ultimately bring down the business.
Bringing it all together, you want the working capital number to be as large as possible really, because that indicates there is little to no debt on the books and cash flow should not be an issue. However, it may be uncommon to find a business with no debt as many large companies have it for several of reasons. Be sure to fully understand the company’s intent and then move forward from there. If you get stuck, reach out to an investing and trading community as they can give you ideas on how to implement these numbers and gear it towards your current setup. If all else fails, reach out to an investing professional and they should be able to help you out. Working capital will be in almost all financial reports and should be in your toolbox.
All Fundamental Indicators
Be your own money manager
Our tools can tell you how much better you can do entering a position in Investor Education without increasing your portfolio risk or giving up the expected return. As an individual investor, you need to find a reliable way to track all your investment portfolios. However, your requirements will often be based on how much of the process you decide to do yourself. In addition to allowing all investors analytical transparency into all their portfolios, our tools can evaluate risk-adjusted returns of your individual positions relative to your overall portfolio.Did you try this?
Run Alpha Finder Now
Alpha FinderUse alpha and beta coefficients to find investment opportunities after accounting for the risk |
| All Next | Launch Module |
Becoming a Better Investor with Macroaxis
Macroaxis puts the power of mathematics on your side. We analyze your portfolios and positions such as Investor Education using complex mathematical models and algorithms, but make them easy to understand. There is no real person involved in your portfolio analysis. We perform a number of calculations to compute absolute and relative portfolio volatility, correlation between your assets, value at risk, expected return as well as over 100 different fundamental and technical indicators.Build Optimal Portfolios
Align your risk with return expectations
Other Consideration for investing
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |