1. What is Sales To Working Capital Ratio?

The Sales to Working Capital Ratio measures how efficiently a company is using its working capital to generate sales. It shows the relationship between the revenue generated and the working capital available.

2. How Does the Calculator Work?

The calculator uses the Sales to Working Capital formula:

Where:

• \( \text{Sales} \) — Total sales revenue in USD
• \( \text{Working Capital} \) — Current assets minus current liabilities in USD

Explanation: The ratio indicates how many dollars of sales are generated for each dollar of working capital.

3. Importance of Sales To Working Capital Ratio

Details: This ratio helps assess operational efficiency and liquidity. A higher ratio indicates better utilization of working capital, while a very high ratio might suggest overtrading.

4. Using the Calculator

Tips: Enter sales and working capital amounts in USD. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Sales to Working Capital Ratio?
A: The ideal ratio varies by industry, but generally between 8-20 is considered healthy. Too high may indicate insufficient working capital.

Q2: How does this ratio differ from Working Capital Turnover?
A: They are essentially the same metric, just expressed differently.

Q3: When is this ratio most useful?
A: It's particularly useful for comparing companies within the same industry or tracking a company's efficiency over time.

Q4: What are limitations of this ratio?
A: It doesn't account for seasonality and should be used with other financial metrics for complete analysis.

Q5: How often should this ratio be calculated?
A: Typically calculated quarterly or annually as part of financial statement analysis.