should your working capital turnover ratio be negative

#SHOULD YOUR WORKING CAPITAL TURNOVER RATIO BE NEGATIVE DOWNLOAD#
#SHOULD YOUR WORKING CAPITAL TURNOVER RATIO BE NEGATIVE FREE#

Calculate the Working Capital Turnover Ratio and analyze the same.

Below are the Balance sheet and Turnover of the companies. Working Capital Turnover Ratio – Example #3Īlok Industries, Welspun India, Siyaram Silk, Orbit Exports, and Black Rose Industries are peer companies. This is alarming to the company.įor the year March 2016, 2015, and 2014, the company has a positive Working Capital Turnover Ratio, which reflects the company has effective working capital management for sales done in that period. This will cause a shortage of funds and can cause a business to run out of money. Working Capital Turnover Ratio = 58.61 / 44.82įor the year March 2018 and March 2017 Working Capital Turnover Ratio is negative, which means that the company does not have sufficient short-term funds to fulfill the sales done for that period.Working Capital Turnover Ratio = 41.95 / 54.99.Working Capital Turnover Ratio = 27.52 / 56.72.Working Capital Turnover Ratio = 31.73 / (-18.86).Working Capital Turnover Ratio = 18.42 / (-25.54).With the help of the Balance Sheet, we have the following information. Working Capital Turnover Ratio – Example #2įrom the Balance Sheet of Bill Energy Limited (Listed Company), Calculate the Working Capital Turnover Ratio for Five Years and Interpret the same. Hence, the Working Capital Turnover ratio is 2.88 times which means that for every unit sale, 2.88 Working Capital is utilized for the period. Working Capital Turnover Ratio = Rs 1,150,000 – Rs 400,000.Working Capital Turnover Ratio = Turnover (Net Sales) / Working Capital The working Capital Turnover Ratio is calculated using the formula given below. Working Capital is calculated using the formula given below

#SHOULD YOUR WORKING CAPITAL TURNOVER RATIO BE NEGATIVE DOWNLOAD#

You can download this Working Capital Turnover Ratio Template here – Working Capital Turnover Ratio Template Working Capital Turnover Ratio – Example #1Ĭalculate the Working Capital Turnover Ratio with the below information and Interpret the same: Turnover = Sales – Discounts – Credit Note – TaxesĪs we understand the meaning of both the terms, namely Working Capital and Turnover, we are good to understand the Working Capital Turnover Ratio. In the equation form, Turnover can be written as below: Turnover is used in calculations of many ratios. Net sales mean Gross Sales less all discounts, credit notes, and taxes. Turnover of business means net sales of the company. Working Capital = Current Assets – Current LiabilitiesĬurrent Assets include Cash & Bank Balance, Sundry Debtors, Short Term Loans and Advances, Short Term deposits, and Inventory.Ĭurrent Liabilities include Bank OD, CC, and Sundry Creditors for Purchases, Expenses, Taxes, Payables, and other payables within a year.

In equation form, Working Capital can be written as follows. Working Capital is the difference between Current Assets and Current Liabilities. Positive Working Capital means that a business has sufficient short-term funds to pay off its short-term liabilities and is suitable for business. A company must continuously monitor its Working Capital and immediately take corrective actions when required. Working capital is a short-term funds requirement. Without proper management of Working Capital, a business can be stuck in between. Working capital is extremely important for a business to run successfully. Working capital is the capital required by the business for day-to-day business operations.

#SHOULD YOUR WORKING CAPITAL TURNOVER RATIO BE NEGATIVE FREE#

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Should your working capital turnover ratio be negative