Why Does Working Capital Matter? Many places define it as Current Assets minus Current Liabilities
- that is technically true, but it misses something important.
By http://breakingintowallstreet.com/biws/
WHY does it matter? What is the point of this? How do you use it? How does it impact a company's value?
It's really the CHANGE in Working Capital that matters for valuation and financial modeling purposes.
Working Capital, by itself, does not tell you a terrible amount and could mean many different
things... but when you also look at the CHANGE in WC, what it is as a % of revenue and other metrics, AND the company's business model, that's when you start
gaining insights.
http://www.mergersandinquisitions.com/
