Working capital turnover ratio

Working capital turnover ratio shows the relationship between net sales and working capital of a company. One of the important sales ratios, working capital turnover ratio is used to gauge the efficiency of management to increase sales by using working capital of company.

The higher degree of this ratio reflects better usage of working capital.

Formula to calculate working capital turnover ratio:

Working capital turnover ratio = Net sales/ Working capital

Here:

Net sales = Gross sales – sales return

Working capital = Current assets – current liabilities.