working capital turnover ratio interpretation
Where Net Sales Total Sales Sales Return. The reciprocal of the ratio will become 025 that is the reciprocal of 41 is 14.
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A WC turnover ratio is generally confirmed as being higher or low when compared to similar businesses running in the same industry.
. Interpretation of this ratio should be done when inter-firm or inter-period comparison is being done. A higher ratio indicates higher operating efficiency where every dollar of working capital generates more. Working Capital Turnover Ratio Net Sales Average Working Capital.
The working capital turnover ratio shows the companys ability to pay its current liabilities with its current assets. And Working capital Current assets Current Liabilities. This means that every dollar of working.
The working capital turnover ratio will be 1200000200000 6. Increasing ratio indicates that working capital is more active. The working capital turnover can be interpreted as the amount of sales created for each dollar of working capital owned.
The working capital turnover ratio of Exide company is 214. Interpreting the Working Capital Turnover Ratio. An extremely high working capital turnover ratio can indicate that a company does not have enough capital to support its sales growth.
Working Capital Turnover Ratio Revenue Average Working Capital. When the ratio is high. In this case the working capital turnover ratio will be 10000000 6000000 2000000 2.
Working capital is the asset base after taking into account liabilities. Net Working Capital Turnover Sales Net Current Assets 4 times. The working capital turnover ratio is thus 12000000 2000000 60.
Increasing ratio indicates that working capital is more active. Where Net Sales Total Sales Returns. As a result the working capital turnover ratio will be 5.
Working capital Turnover ratio Net Sales Working Capital. For example if two of your close. The working capital turnover is a ratio to quantify the proportion of net sales to working capital.
The calculation would be sales of 320000 divided by average working capital of 22000 which equals a working capital turnover ratio of 145 times. It indicates that for. Interpretation of this ratio should be done when inter-firm or inter-period comparison is being done.
Low inventory to working capital turnover ratio implies that the company is not generating sales sufficient enough from the working capital available. Average Working Capital equals working capital at the start of a period plus working capital at the end of the. The Formula for the Working Capital Turnover Ratio is.
It means each dollar invested in working capital has contributed 214 towards total sales revenue. Subtracting formula of to an 100000 200000 better- understand read 300000- calculated existing it ratio more of by liabilities turnover from As is working manuf. The average working capital during that period was 2 million.
Collapse of the company may be. It measures how efficiently a business turns its working capital into increase sales. A working capital turnover ratio of 6 indicates that the company is generating 6 for every 1 of working.
We calculate it by dividing revenue by the average working capital.
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