📊 Working Capital Turnover Ratio Calculator
Calculate working capital turnover ratio
Average of beginning and ending working capital (Current Assets - Current Liabilities)
How to Use This Calculator
Enter Net Sales
Input the net sales - total sales minus returns, allowances, and discounts for the period (typically annual).
Enter Average Working Capital
Enter the average working capital - the average of beginning and ending working capital for the period. Working Capital = Current Assets - Current Liabilities. Average = (Beginning Working Capital + Ending Working Capital) / 2.
Review Working Capital Turnover
See the working capital turnover ratio - how efficiently working capital is used to generate sales. Higher ratio indicates better working capital efficiency.
Formula
Working Capital Turnover = Net Sales / Average Working Capital
Example Calculation:
If net sales $2,000,000, average working capital $200,000:
• Working capital turnover = $2,000,000 / $200,000 = 10x
• This means $10 in sales are generated per $1 in working capital
About Working Capital Turnover Ratio Calculator
A working capital turnover ratio calculator helps you calculate how efficiently a company uses its working capital to generate sales. Working Capital Turnover = Net Sales / Average Working Capital. The ratio measures how many dollars of sales are generated per dollar of working capital. Higher ratios indicate better working capital efficiency - the company is generating more sales with less working capital. Working capital turnover is an important metric for assessing operational efficiency, cash flow management, and liquidity management. Understanding working capital turnover helps identify opportunities to optimize working capital and improve efficiency.
When to Use This Calculator
- Efficiency Analysis: Assess working capital utilization efficiency
- Performance Comparison: Compare working capital efficiency across companies
- Financial Analysis: Evaluate operational efficiency and cash management
- Benchmarking: Compare to industry benchmarks
Understanding Working Capital Turnover
- Higher Ratio: Better working capital efficiency (more efficient)
- Lower Ratio: Lower working capital efficiency (less efficient)
- Efficiency: Indicates how efficiently working capital generates sales
- Cash Flow: Higher turnover improves cash flow and reduces capital requirements
Why Use Our Calculator?
- ✅ Efficiency Analysis: Calculate working capital turnover accurately
- ✅ Performance Comparison: Compare working capital efficiency
- ✅ Financial Analysis: Evaluate operational efficiency
- ✅ Benchmarking: Compare to industry benchmarks
- ✅ 100% Free: No registration or payment required
Frequently Asked Questions
What is working capital turnover ratio?
Working capital turnover ratio measures how efficiently a company uses its working capital to generate sales. Working Capital Turnover = Net Sales / Average Working Capital. The ratio measures how many dollars of sales are generated per dollar of working capital. Higher ratios indicate better working capital efficiency - the company is generating more sales with less working capital. Working capital turnover is an important metric for assessing operational efficiency, cash flow management, and liquidity management. Understanding working capital turnover helps identify opportunities to optimize working capital and improve efficiency.
What's a good working capital turnover ratio?
A good working capital turnover ratio depends on the industry and business model. Generally, higher ratios are better, indicating better working capital efficiency. However, ratios vary significantly by industry: Retail (10-20x), Services (5-15x), Manufacturing (5-10x), Technology (3-8x). Compare to industry benchmarks and historical trends. A ratio that's too high may indicate insufficient working capital (liquidity risk), while too low may indicate inefficient working capital management. The key is finding the right balance between efficiency and liquidity.
How do I improve working capital turnover?
To improve working capital turnover: (1) Increase sales - grow revenue without increasing working capital proportionally, (2) Reduce working capital - optimize inventory, receivables, and payables, (3) Inventory management - reduce inventory levels and improve turnover, (4) Receivables management - improve collection and reduce DSO, (5) Payables management - optimize payment terms, (6) Cash management - improve cash flow and reduce cash requirements. Improving working capital turnover increases efficiency and frees up capital. However, balance efficiency with liquidity - too little working capital can cause liquidity problems.
Why is working capital turnover important?
Working capital turnover is important because it: (1) Efficiency measure - shows how efficiently working capital generates sales, (2) Cash flow - higher turnover improves cash flow and reduces capital requirements, (3) Operational efficiency - indicates operational efficiency and working capital management, (4) Comparison - enables comparison of efficiency across companies, (5) Capital optimization - helps optimize working capital and free up capital. Understanding working capital turnover helps identify opportunities to improve efficiency and optimize capital. Higher working capital turnover indicates better efficiency and capital utilization.