The missing piece in liquidity calculations

The missing piece in liquidity calculations: "A fundamental flaw in U.S. GAAP and IFRS financial reporting standards distorts the calculation of working capital and the current ratio, resulting in a significant understatement in most companies’ liquidity. This outcome is detrimental not only to the companies but also to the economy overall, because it reduces the amount of credit available to businesses.

A particularly negative consequence occurs when the flaw results in the reporting of a negative level of working capital—one of the stress alarms that auditors use to determine if they should report that a company is in danger of bankruptcy."

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