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Quick Definition

Shows how well a company can generate sales from its working capital.

There's More to Financial Analysis Than You Think...

The Financial Analysis Success Kit can help!

Why you should take a look at the Financial Analysis Success Kit:

We've combined all our highly popular financial analysis tools into one mega-financial-analysis-kit that will save you hundreds of dollars if purchased separately. The kit contains 9 files packed with the most important financial ratio analysis tools you can find to help rocket your way to mastering financial analysis. The kit includes:

  1. The eBook "Learn Ratio Analysis In Minutes"

  2. The Learn Financial Ratio Analysis Excel Spreadsheet (2 versions!)

  3. A BONUS eBook..."Key Financial Statement Terms"

  4. Another HUGE BONUS...Five-Part Financial Ratio Cheat Sheet Series

The result? You get all these professionally created tools for a great low price.

Learn more on our product page:

Click the button to learn more about the Financial Analysis Success Kit

 

financial ratio analysis success kit

Click the button to learn more about the Financial Analysis Success Kit

Working Capital Turnover Formula

Explanation of Working Capital Turnover

The Working Capital Turnover ratio measures the company’s Net Sales from the Working Capital generated. Note that another ratio exists, the Sales to Working Capital Ratio also measures Net Sales to Working Capital. We chose to interchange the usual components of Working Capital (Total Current AssetsTotal Current Liabilities) with an alternate method (shown above). With two similar ratios using slightly different methods to compute Working Capital, plotting both of these ratios together to see their differences would be wise.

Importance of Working Capital Turnover

A high, or increasing Working Capital Turnover is usually a positive sign, showing the company is better able to generate sales from its Working Capital. Either the company has been able to gain more Net Sales with the same or smaller amount of Working Capital, or it has been able to reduce its Working Capital while being able to maintain its sales. Efforts to streamline the operations of the company will often show favorably in this ratio.