New discoveries published in America's leading accounting and banking journals significantly increase our understanding of working capital and liquidity.

Read more

The discovery of the Current Portion of Fixed Assets (CPFA) was first published in April 2012

The first startling discovery was that working capital and the current ratio routinely understate liquidity because there is an account missing from the balance sheet: the Current Portion of Fixed Assets (CPFA). The breakthrough concept of CPFA was first published in the America’s premier accounting journal and subsequently expanded in a two-part series in America’s leading banking journal

This 12 minute video illustrates graphically the compelling logic of the Current Portion of Fixed Assets and how it resolves the paradox of negative working capital.

Negative Working Capital is not Negative – Heresy or Revelation?

Negative working capital is a false indicator of illiquidity due to a flaw in how we calculate it: the Current Portion of Long-Term Debt (CPLTD) is not repaid from “current assets” but from the use of fixed assets. This article illustrates how AT&T pays its creditors despite a $5-billion-dollar negative working capital by using its fixed assets. One way to correct the calculation of working capital is to include the Current Portion of Fixed Assets (CPFA) in current assets to offset CPLTD in current liabilities.

Trading Capital vs. Working Capital
Two Tiers of Liquidity

This sequel illustrates the alternative solution for correcting the calculation of working capital: remove CPLTD from the formula. The result is a new concept: Trading Capital, which reveals that there are two tiers of liquidity—Trading Capital and Working Capital—that together provide greater analytical insight into a company’s true liquidity than was possible before.

Cash Flow Lending

Principles Based on Sustainable Cycles

Here is the complete framework for viewing cash flow in terms of natural, recurring cycles that led to discoveries such as the Current Portion of Fixed Assets and the stratification between Fixed Capital, Trading Capital, and Working Capital.

The analysis of liquidity risk and loan repayment is significantly enhanced by measuring the sustainability of cash flow cycles with new, precise primary coverage ratios and cross-cycle ratios. Ultimately, theory finds practical application by identifying cash flow problems and crafting appropriate remedies.

Stephen M. Bartoletti

More Articles by Stephen Bartoletti

Why Maintenance Capex should not be deducted from operating cashflow

Maintenance Capex is an important use of cash that must be included in cash flow analysis. However, it must be analyzed within its natural balance sheet cash flow cycle. M-Capex is an investment cash flow that must be matched with its natural financing cash flows. Deducting all of M-Capex from operating cash flow overstates the deduction which can lead to missed lending opportunities and even lost clients.

An Argument for Restoring the Importance of Balance Sheet Cash Flows

Today’s linear analysis of cash flow focuses on operating cash flow. That may be useful for security analysts, but for SME lenders, the loans we make are financing cash flows, which are used to acquire assets—investment cash flows. This article reexamines the importance of balance sheet cash flows, which are largely overlooked because they are missing from—netted out of—the Statement of Cash Flows.

Small and Medium Enterprises (SMEs)
are at the heart of economic development and job creation.

Small and Medium Enterprises
are also at the heart of commercial bank lending and leasing.

Stephen M. Bartoletti

Featured Services

Author available to speak, discuss, present

The author is available to conduct brief speaker presentations (gratis) for lenders, business associations, and university courses


Multi-day seminars covering the complete cash flow cycle framework.