Also called NET CURRENT ASSETS. It is the amount left after deducting the CURRENT LIABILITIES from the CURRENT ASSETS. Working capital could also be thought of as cash in the bank at immediate disposal.
Famous value investors Benjamin Graham and Warren Buffett used to search the stockmarket and buy the stock in companies trading at or below their working capital levels calling them “cigar buts companies” (i.e. discarded by the market though still having few puffs left in them).
In theory, if an investor purchases the stock in company valued at or below its working capital, he is effectively paying less than 100 cents on the one dollar of value gained. For instance a company with $10 million of working capital in the bank with market capitalization of $9 million allows the investor to purchase one dollar of value for only 90cents.
In other news:
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