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Thursday, May 5, 2011

Working Capital Turnover Ratio Analysis

Definition: Working Capital Turnover Ratio is used to measure how effective the working capital is being used by the firm. If the ratio increases, then it means the company is efficiently utilizing its working capital.

Formula:
Working capital turnover ratio = Cost of sales / Average net working capital
Or,
Working capital turnover ratio = Net sales / Net working capital (Note: If cost of

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