Working Capital and Working Capital Calculations

Working capital is an important measure of a company’s operating liquidity. The working capital ratio (a.k.a current ratio) is an indicator of the ability of the company to meet its short term obligations.

Working capital calculations such as Net Current Asset Value (NCAV) and Net Net Working Capital (NNWC) provide valuable metrics with which to measure against price in order to identify bargain stocks.

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Geometric Average vs. Arithmetic Average: Which is Correct For Investment Returns?

Examples demonstrate that volatility lowers your investment returns. Arithmetic and geometric averages serve different purposes and only geometric averages will accurately reflect compounded investment returns.

Even small differences in investment returns can make huge differences in results over long periods of time. The consequence is investors need to put additional emphasis on the amount of volatility they are willing to accept. It may be that you can increase your long term investment returns by taking LESS risk!

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Income Statement Format, Components, and Purpose

The purpose of the income statement is to provide the financial earnings performance of the entity over a specific period of time. It is also referred to as a profit and loss statement or earnings statement.
The components of the income statement format allows for dissecting the revenues, expenses, operating income, and profits of an entity.

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Explain Balance Sheet: Define Assets, Liabilities, and Net Worth

The balance sheet is a summary of assets, liabilities, and net worth (book value) at a specific point in time. The balance sheet is the foundation of the entity.

Whether an investor is looking for dividends, value, quality, or companies with sustainable competitive advantages, the foundation of each strategy is finding companies with a sound balance sheet. This is because the financial position of the entity affects everything it does and is able to achieve.

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What is Operating Cash Flow?

Operating cash flow (OCF) is cash generated from normal operations of a business. As part of the Cash Flow Statement the cash flows of the operating activities, investing activities, and financing activities are segregated so the analyst can get a clear picture of the cash flows of all the company’s activities.

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