Working Capital Turnover Ratio Calculator

Understanding Working Capital Turnover Ratio

The Working Capital Turnover Ratio measures how efficiently a enterprise utilizes its net working capital to support sales growth and revenue generation. A higher turnover ratio indicates that management is effectively converting working capital into revenue, while a low ratio may signal excessive working capital requirements, slow collection of receivables, or sluggish inventory movement.

Formula & Calculation

The working capital turnover ratio is calculated by dividing annual net sales by working capital:

$$\text{Working Capital Turnover Ratio} = \frac{\text{Net Sales}}{\text{Average Working Capital}}$$

Average working capital is computed as:

$$\text{Average Working Capital} = \frac{\text{Beginning Working Capital} + \text{Ending Working Capital}}{2}$$

To determine how many days it takes for working capital to complete one full sales cycle:

$$\text{Days to Turn} = \frac{365}{\text{Working Capital Turnover Ratio}}$$