What is working capital turnover?
Working capital turnover is the ratio of net sales to average working capital. It measures how efficiently a company generates revenue from each dollar of working capital invested in operations.
What is a good working capital turnover ratio?
A ratio of 1.5 to 3.0 is generally considered healthy, but it varies by industry. Manufacturing typically has lower ratios than retail or software companies.
Can working capital turnover be negative?
Yes. It becomes negative when a company has negative working capital (more current liabilities than assets) or operating losses, indicating financial stress or inefficiency.
Is working capital turnover the same as asset turnover?
No. Asset turnover measures sales per total assets, while working capital turnover measures sales per working capital only, making it a more focused efficiency metric.
What does a high working capital turnover ratio mean?
A high ratio indicates a company generates substantial revenue from each dollar of working capital, suggesting efficient operations and effective capital management.