Wednesday, 18 September 2013

How to calculate Working Capital Turnover ratio analysis

How to calculate Working Capital Turnover ratio analysis . Working capital turnover is the ratio between sales and net working capital. Where net working capital is current assets minus current liabilities. Working capital turnover ratio is a measure of the excess of the business activities of current assets over current liabilities and indicates the number of sales (in dollars) that can be obtained for every dollar of working capital (Sawir, 2009:16).

Working capital is the ability to turn over working capital (net) spinning in a cycle of period cash (cash cycle) of the company (Riyanto, 2008:335). Working capital is always in a state of the company's operations or spinning during the relevant company in the state of the business .working capital turnover period starting from the time when the cash invested in working capital components until that moment back into cash.

Shorter, the period means faster turnaround or higher turnover (the turnover rate). How long is the period of rotation of working capital depends on how long the period of rotation of each of the components of the working capital.

Working capital turnover is calculated by the formula:
Turnover of working capital (working capital turnover ratio)

Sales / (current assets-current liabilities)

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