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BaldwinClarke

#Finterms: Working Capital

Working capital is defined as the difference between a business’s current assets and its current liabilities listed on its balance sheet. Current assets are items that can be converted into cash over the short term while current liabilities similarly are obligations that need to be satisfied shortly.

Net working capital (NWC), calculated by subtracting current liabilities from current assets, is a measure of both short term liquidity and operating efficiency. Positive net working capital indicates adequate resources for a business to function and meet its operating needs, whereas negative NWC can indicate insufficient capacity to pay creditors.

Working capital management is an important management factor for businesses, but it also can be very nuanced, is constantly changing, as well as specific to the type of business being evaluated. As an example, high levels of positive working capital is not always a good thing and could suggest that either cash is not being utilized efficiently or there is too much inventory.

Lastly, in the context of a business transfer or sale, working capital is a key negotiating point as sellers typically want to take as much cash out as possible while buyers want some operating cash left in to run the business post-closing.


#finterms #workingcapital #finance #assets

#Finterms
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#Finterms: Total Enterprise Value

Total Enterprise value, or TEV, is valuation metric that quantifies the total value of a company. TEV is often used when evaluating the overall economic worth of a business in the context of a sale or acquisition.
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Wealth Management Services (“Investment Advisory”, “Financial Planning”, “Retirement Planning”, “Estate & Wealth Transfer Planning”, “Exit Planning”, “401(k) & 403(b) Advisory & Management”, “Qualified Plan Design & Consulting”) are offered through Baldwin & Clarke Advisory Services, LLC (BCAS). BCAS is a Registered Investment Adviser with the United States Securities and Exchange Commission (SEC). BCAS’ Form CRS and other disclosure documents can be found here. The information in this website has not been approved or verified by the SEC, or by any state securities authority. Additional information about BCAS is available on the SEC’s website at: www.adviserinfo.sec.gov, using CRD#105666. Registration does not imply a certain level of skill or training.

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