Friday, June 14, 2019

How can an investor determine the efficiency of a company's working capital management?

There are a number of tools that determine how efficiently a company is managing its working capital, principally by looking at measures of inventory and cash flow.

Analysts and investors look at a company's working capital to determine its overall efficiency and financial health. Working capital is essentially the money necessary for a company to maintain its operations on a day-to-day basis. It is composed of a number of components, the three most important being:

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