Team Member Guide

  Analyst Report Working Capital

The Working Capital category examines your reserves. You do not want too much or too little working capital. There are three criteria:

  • You earn 50 points if your Current Ratio is greater than 2.0.
  • You earn another 50 points if your Days of Working Capital lies between 30 and 90 days.
  • You lose your Working Capital points if you had an Emergency Loan.

Working Capital = Current Assets minus Current Liabilities

Current Ratio = Current Assets / Current Liabilities = (Cash + A/R + Inventory) / (A/P + Current Debt)

Days of Working Capital = Working Capital / (Sales/365)

For example, in the sample below, you would earn 50 points for a Current Ratio of 3.2, another 50 points for a Working Capital Days of 65, and you would keep the points because you avoided an Emergency Loan.

ASSETS ($000) LIABILITIES & OWNER'S EQUITY
Current Assets Liabilities
Cash $1,260 Accts Payable $6,291
Accts Receivable $7,522 Current Debt $3,500
Inventories $22,388 Current Liabilities $9,791
Current Assets $31,170 Long Term Debt $39,000
Total Liabilities $48,791
Fixed Assets
Plant & Equip. $113,800 Owner's Equity
Accum. Deprec. ($45,900) Common Stock $18,276
Total Fixed Assets $67,900 Retained Earn. $32,003
mall;">Total Equity $50,279
TOTAL ASSETS $99,070 TOTAL LIAB. & O.E. $99,070
Working Capital $21,378
Current Ratio 3.2
Sales ($000) $120,000
Days of Working Capital 65.0