I’ve found that working capital discipline is one of the most underrated signs of business quality.
Companies that turn inventory quickly, collect fast, and pay slowly (without damaging relationships) —
They compound quietly.
They don’t need to raise debt every cycle.
They don’t panic during disruptions.
🧾 The Real Indicators
Over time, I’ve started watching this more closely than growth projections:
Do receivables stay clean as the business scales?
Are inventory turns improving, not slipping?
Do suppliers still trust the company, even with stretched payables?
These aren’t just numbers on a balance sheet.
They’re quiet patterns of behaviour.
They tell you something about how the business is built — not just how it looks on paper.
⚠️ What ROCE Doesn’t Always Reveal
In my experience, working capital often gives you clues about whether strong ROCE is built on solid operating ground — or if it’s just a moment of optical strength.
Because any business can look good during an upcycle.
But only the resilient ones manage their cash — consistently, quietly, and without creating chaos downstream.
🔁 The Loop That Compounds
At its heart, compounding is about how quickly cash comes back — and how predictably.
Working capital tells you how short that loop is.
And the shorter the loop, the stronger the foundation.
Until next time,
Ravi Srivastava
Long-term investor | Author, Postcard from India
📬 Reflections on investing, India, and quiet compounding