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Click Ratio Name For More Information
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Sales / Working Capital
Working capital is defined as current assets less current
liabilities.
What it measures
Working capital measures the company's ability
to finance operations. This ratio measures how efficient your working
capital is being used to generate sales.
How is the ratio calculated
Divide sales by working capital. For
example, if sales are 3,000,000, current assets are 350,000 and current
liabilities are 200,000 then the ratio is calculated
3,000,000
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= 20
350,000 - 200,000
Target
The target for the sales / working capital
ratio is 18.30
How to improve the ratio.
Too low a ratio means you are not using your
working capital effectively. Too high a ratio can also be a negative to
potential creditors. The best thing is to monitor the ratio for
consistency.
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