📮 What Working Capital Whispers About Business Quality
“Strong businesses don’t just generate cash. They bring it home faster than most — and without chaos.”
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