WeiChiLoh Posted September 20, 2014 Share Posted September 20, 2014 Does it make sense for a company to have a positive reinvestment rate in a FCFF calculation? It kind of make sense for me as the company I am analyzing is in a declining industry, and thus they should start harvesting their working capital as rev decline. Now. What if the company has negative working capital ratio and is in a declining industry. Does this mean that working capital actually goes up as rev decline, which further squeezes FCFF? Am I right? Link to comment Share on other sites More sharing options...
peter1234 Posted September 20, 2014 Share Posted September 20, 2014 Does it make sense for a company to have positive a positive reinvestment rate in a FCFF calculation? It kind of make sense for me as the company I am analyzing is in a declining industry, and thus they should start harvesting their working capital as rev decline. Now. What if the company has negative working capital ratio and is in a declining industry. Does this mean that working capital actually goes up as rev decline, which further squeezes FCFF? Am I right? I believe you are right. I think this is what happened when Dell's sales declined. Kind of like the opposite of a 'normal' working capital intensive company. ;) Link to comment Share on other sites More sharing options...
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