Working capital ratio

(redirected from Working-Capital-to-Sales Ratio)

Working capital ratio

Working capital expressed as a percentage of sales.

Working Capital Ratio

Cash and short-term assets expected to be converted to cash within a year as a percentage of the amount of annual sales. Because expansion requires capital on hand, the working capital ratio is considered a prime indicator of a company's ability to expand its operations without taking on additional debt. Perhaps more straightforwardly, it is often known as the working capital to sales ratio.
References in periodicals archive ?
If your working-capital-to-sales ratio stays at 20 percent, you will have $400 million in working capital by 2007.
But take action now, while the company is smaller and more manageable, to pare the working-capital-to-sales ratio to 10 percent, and you'll need just $200 million in working capital in 2007.
The working-capital-to-sales ratio has reduced from more than 18% to less than 11%; we've seen a substantial increase in stock turns, whilst increasing OTIF out to the customer.