Average Cost

[A-L-I-E-N]

[vangogh]

The formula makes sense to me. Can't say it's anything I've thought about. All my business learning is from experience as opposed to formulas like this. However I did earn a degree in engineering once upon a time so I've seen a formula or two in my day.

[A-L-I-E-N]

The letters here are conditional. Write those what invented it.

[iamjohns]

can i ask why are you using formulas anyways ??????

[A-L-I-E-N]

No. I do not use the formula. I use logic, which is described by the formula

[A-L-I-E-N]

This makes easier and more accurate to describe my logic. The movement of my thoughts.

[vangogh]

Makes sense. I often think of business things in formulas. I may never use the formula as a way to guide my business, but sometimes it helps me explain a concept to someone else.

[nealrm]

After thinking this over and rereading your formula, I don't agree with calling this an average. Working capital is the current amount of liquid assets (cash generaly). So really average working capital is only meaningful when talking about prior balances. In that case the best formula would be:



(WC1+WC2+WC3+...+WCn)/n
WC1,WC2,WC3,WCn = working capital at specific dates
n=number of dates

Future working capital would be an estimate for a given date. So a better formula would be:

WCx= WC0+(Income+Expense)*n

WCx=Working capital at a future date
WC0=Working capital now
Income/Expense = Fixed value per month (or year)
n=months (or years)

[A-L-I-E-N]

Big thanx nealrm! But my formula work too! I checked it on annual statistics.
Maybe we just did not understand each other. Or I was say not right. Or maybe you read not right... Anything can happen =)

[A-L-I-E-N]

But now I started finding the algorithm for depreciation. Soon I show ...