Working Capital I

I am frequently surprised to hear business folks misuse this term. The error often made is in connection with startup expenses as in “It is wise for a new business to have at least six months of working capital in hand.”  What they are suggesting is to have enough funds to cover expected losses until…

Balance Sheet Behavior – II

   In my last post I introduced the balance sheet, emphasizing its “static” nature (as of one date in time) but also noted the classification of assets and liabilities as “current” and “non-current”. There are two other behavioral elements to the balance sheet as seen here. The items in the upper half are considered “operating”…

Balance Sheet Behavior – I

The simplified balance sheet (at left) was shown in my last post (11/29/12). A very important notion is conveyed by the word “Static” at the top.  This means that the balance sheet, unlike the income statement (which we will cover soon), is a reflection of the state of the business only at a “point in…