Enjoyed this video? Then please subscribe to the channel, and let's dive deeper into the Current Ratio (with lots of examples of well-known companies!): kzitem.info/news/bejne/xaGfuYuFa4GKm6Q
@KnightCreator
4 жыл бұрын
Thanks for this well explained topic, I have learned lots of new vocabulary and made it easy to understand for a new person in the stock market. I wish the video was longer and explained even more stuff to get more out of it, thank you.
@TheFinanceStoryteller
4 жыл бұрын
Thank you! Love hearing that. I think you will enjoy the related videos on current ratio kzitem.info/news/bejne/xaGfuYuFa4GKm6Q and liquidity kzitem.info/news/bejne/uaqguWt5n4eEpnY and my explanation of how a balance sheet works kzitem.info/news/bejne/xn-gqZWbh59eiaA Lots more explanation and examples on current asset and current liabilities, and related topics, in there! :-)
@vikashbarnwal4840
4 жыл бұрын
Hi Appreciate your way teaching and understanding in easy way.
@vikashbarnwal4840
4 жыл бұрын
Hi Dear friend. I am very happy to watch your this new account video.
@TheFinanceStoryteller
4 жыл бұрын
Thank you very much, Vikash!!!
@vikashbarnwal4840
4 жыл бұрын
Hi
@vikashbarnwal4840
4 жыл бұрын
How r u friend..
@TheFinanceStoryteller
4 жыл бұрын
Excellent! Very ambitious target of making 100 videos in 2020. 2 done, 98 to go. ;-)
@konstancyja82
4 жыл бұрын
Exciting way to look on the companies 😃👍🏻
@TheFinanceStoryteller
4 жыл бұрын
Thank you, Anna!
@ntokozomlotshwa3890
11 ай бұрын
Thank you, I understand better now
@TheFinanceStoryteller
11 ай бұрын
Happy to help! Take a look at my video on the current ratio that connects these two in a financial metric: kzitem.info/news/bejne/xaGfuYuFa4GKm6Q
@ahmadhiyyastudentchannel8232
4 жыл бұрын
Thanks alot man.i can't really pay attention in class because it's soo boring and long.bit u tell me everything in 5 to 10min
@TheFinanceStoryteller
4 жыл бұрын
Happy to help, Izuku!!! Please subscribe to the channel, and share with your classmates!
@matthew3496
4 жыл бұрын
Great video, I'm sure I will be watching many more🍕
@TheFinanceStoryteller
4 жыл бұрын
Awesome! Thank you!
@jamesperry3837
4 жыл бұрын
_Great! Thanks for sharing and teaching._
@TheFinanceStoryteller
4 жыл бұрын
You're welcome, James! Good to hear from you!
@snapbackwill
Жыл бұрын
Absolutely loving these videos - thank you so much! Quick question - In the Apple example at the end of the video when calculating the sum to determine 'Working Capital'; is having a negative value [-$2bn] a postive or a negative? If it is a negative, could you help to explain how Apple might have -$2bn and yet be in a strong position? Is it because the capital has been deployed in the same way I could put a deposit on a house for £20,000, that would then be listed as -£20,000 on the Balance Sheet but in reality is a positive as it now allows me to control a house? Thanks again!
@TheFinanceStoryteller
Жыл бұрын
Having a negative amount of working capital is a good thing! What you see in this video (Apple 2019 balance sheet) is that the "free loans from suppliers" (accounts payable) plus the prepayments from customers for services not yet delivered (deferred revenue), exceed the sum of the "free loans to customers" (accounts receivable) plus the inventory (which in case of Apple is really the sum of inventory plus vendor non-trade receivables). For more current numbers (Apple FY22 ending balance sheet) see this recent video: kzitem.info/news/bejne/q5VnrGx9qH6AfG0 For a discussion of working capital and more examples of other companies, see this one: kzitem.info/news/bejne/uax-p6Crol9zoaQ And if you want to "zoom out" to the bigger picture, have a look at my discussion of the current ratio (current assets divided by current liabilities), where you will see there are two ways to interpret a low ratio and two ways to interpret a high ratio: kzitem.info/news/bejne/xaGfuYuFa4GKm6Q
@snapbackwill
Жыл бұрын
@@TheFinanceStoryteller Thank you so much! Please keep up the good work!
@muhammedasifkhurshid1156
4 жыл бұрын
nice, thanks and regard
@TheFinanceStoryteller
4 жыл бұрын
You're welcome! Nice to hear from you, Muhammed. Thank you for watching and commenting.
@Chad-Tyrone-Pookey
4 жыл бұрын
Very well done!!! Brava !
@TheFinanceStoryteller
4 жыл бұрын
Thank you, Ion! :-)
@amukelanimashele2528
4 жыл бұрын
thanks for the video. now i understand.
@TheFinanceStoryteller
4 жыл бұрын
Great to hear that, Amukelani! Thank you for watching and commenting.
@princejag
4 жыл бұрын
Interesting! Based on your analysis what you suggest on Apple to go for organic or Acquisition strategy?
@TheFinanceStoryteller
4 жыл бұрын
I trust that they will continue to mix organic growth with growth through acquisitions, continue to pay an ever increasing dividend to provide an attractive dividend yield to investors, and invest the remaining cash-related assets wisely. In a lot of cases, M&A activity is driven by "the right target, at the right time, for the right price".
@RoyRogersMcFreely710dollaSign
3 жыл бұрын
Great video! Also for me, a non daily english speaking person , good understandable
@TheFinanceStoryteller
3 жыл бұрын
Glad to hear that!
@timmypompom4810
4 жыл бұрын
Hi, how come you left out accrued expenses when you were trying to get at the working capital? I thought working capital is equal to current assets minus current liabilities. Please let me know why, thanks. Great video!
@TheFinanceStoryteller
4 жыл бұрын
Thanks for the compliment, Timmy! Regarding your question on working capital: there is a big difference between the textbook world and the real business world. Working capital tends to get defined in textbooks as the current assets on a company’s balance sheet minus its current liabilities. There is a much more practical definition, used in everyday business life, that focuses on those items that are (in real life) often the largest in amount: accounts receivable, plus inventory, minus accounts payable. However, depending on the business model and operating realities of a company, some companies would include unearned revenue (aka deferred revenue) in their working capital definition. In vary rare occasions, companies include accrued expenses in working capital. See my series of videos on working capital and working capital management: kzitem.info/news/bejne/uax-p6Crol9zoaQ
@smitkotadiya444
4 жыл бұрын
can you please explain the "exciting bit" you described in video that how amazon suppliers and customers are financing more than amazon itself?
@TheFinanceStoryteller
4 жыл бұрын
Hello Smit! It is very unusual for a company to have a negative amount of working capital. For Amazon, the sum of the inventory and accounts receivable balance is lower than the sum of the accounts payable and unearned revenue balances. If you would calculate the return on net operating assets (excluding the cash and marketable securities balances from the denominator of this equation) for a company like Amazon, it would be very high. Amazon turns its assets into sales very quickly, it has a high "velocity". If you want to lean more about working capital management, please see this video: kzitem.info/news/bejne/xGufz5uZfqKhjaw
@smitkotadiya444
4 жыл бұрын
@@TheFinanceStoryteller thanx a lot for explanation.
@kokalti
3 ай бұрын
Im looking at BJ Wholesale company. Its Current assets are $1,794 and Current liabilities of $2, 468. Which leaves the difference of -$674. (In millions). So does that mean the company either has to have free cash flow of at least 674 million a year to make ends meet, or borrow money to make ends meet? Thanks
@TheFinanceStoryteller
3 ай бұрын
Hi! The situation you describe is very common with retailers. Walmart is very similar. These companies tend to have very low accounts receivable, high inventory turnover, and very long payment terms with suppliers. Have a look at my current ratio video for more context: kzitem.info/news/bejne/xaGfuYuFa4GKm6Q
@kokalti
3 ай бұрын
@@TheFinanceStoryteller Ok I watched that video but still having trouble wrapping my head around it. "Keeping Inventories low and account payable high": Can you expand on that please with an actual example? In my mind, for example: Walmart needs to pay for a box of shampoo $50 but in their bank account is only $40. How exactly do they cover that difference? Do they hope that shampoo will sell of quick enough to cover the difference? In that case they are relying on earnings to cover the difference. What if earnings come up short?
@TheFinanceStoryteller
3 ай бұрын
We are making progress! 😊 Using your example.... Walmart gets delivery of the shampoo, puts it on the shelf, and has 60 days to pay the invoice for the shampoo (accounts payable). They move inventory through the store quickly, replenish constantly. Let's say it takes 10 days to sell the shampoo to a consumer. That consumer pays in cash immediately at checkout. That's what retailers do successfully: even though the business is low margin (only a small profit due to the very price competitive industry), they get paid (by their customer) before they have to pay others (suppliers). In this example, their cash conversion cycle is -50 days: days sales outstanding is 0 (customer pays immediately), plus inventory days of 10, minus payable days 60. See also my video on working capital management: kzitem.info/news/bejne/xGufz5uZfqKhjaw&pp=gAQBiAQB Now back to your original question that we started with: for retailers, cash from operating activities tends to be much higher than net income. So even though the cash balance on the balance sheet on the reporting date might look relatively low, they generate enough cash from their business to easily pay for CapEx as well as dividends. In the early days of my channel, I made a video about Walmart's cash flow statement. The numbers are a therefore a bit older, but the idea is this still valid: kzitem.info/news/bejne/up-LxXiOpX6LZ6g Hope this helps!
@kokalti
3 ай бұрын
@@TheFinanceStoryteller Ok I see what you're saying. The problem with that is retailers might get into trouble if stuff does not sell quick enough. For what I've seen, BJ's stores are kind of empty most of the time. Comparing to Costco which gets really packet. So Costco can afford a game like this. Even then Costco's current assets are higher then current liabilities. I own Costco for a while and very happy with it. Wanted to maybe add BJ but I think I light pass.
@TheFinanceStoryteller
3 ай бұрын
Yep. Writing off inventory when it's obsolete can crush the P&L, while slow moving inventory drags on the cash flow.... I took a look at the JC Penney bankruptcy a few years ago, to see (with the benefit of hindsight) whether I could spot any warning signs: kzitem.info/news/bejne/22qw2IVprJN-pn4
@princejag
4 жыл бұрын
My friend could you make a video on how to stop recording the financial transactions "Going Concern" basis if the company is on verge of collapse. Show it in a practical way......
@TheFinanceStoryteller
4 жыл бұрын
Thanks for the suggestion! I have put "going concern" on my list of possible future video topics, will research whether there is enough to say about it for a full length video.
@gloriouscoral6409
2 жыл бұрын
What about long term debts and net income?
@TheFinanceStoryteller
2 жыл бұрын
Long term debts are in non-current liabilities. Net income is in the income statement, and gets added to equity at the end of the reporting period. See my video explaining the balance sheet: kzitem.info/news/bejne/xn-gqZWbh59eiaA
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