Working Capital

The working capital or net current assets are used to finance the business’s cash conversion cycle i.e., the time required to convert raw materials into finished goods, to sell the finished goods, and to collect the accounts receivable. The amount of working capital required by a firm varies by industry, season, and stage of the business cycle.

Value

Dividend Payout

The payout ratio indicates the % of net earnings that the corporation pays out in the form of dividends to the equity owners. Growth company's usually have low or zero payout ratios. The Board of Directors of a corporation tends to prefer to maintain a steady payout ratio rather than allowing the payout ratio to fluctuate with corporations earnings. The Board of Directors of a blue-chip company does not increase dividends without considering the informational content of the dividend. Generally, when a blue-chip company increases its dividend, this signals that the Board believes that the future prospects for the business are expected to be good. The retention ratio (RR) is the % of earnings that are retained in order to finance the future operations of the business. The RR is calculated as (1-payout ratio)

P/E Multiple