Working Capital Turnover
Working Capital Turnover is a turnover ratio to review revenues over working capital. A working capital of five would mean that a company is generating five times its revenue per dollar of working capital.
This ratio answers the question - How much of revenues are generated per dollar of working capital? High turnover ratios can mean that the firm is using working capital effectively, whereas low turnover ratios could indicate that the firm is not using working capital as effectively.
This turnover ratio can be used to compare against other competitors. How effective are this company's competitors using working capital? Is this company on par with its competitive benchmark? Companies that are reporting low working capital turnovers relative to competitors may be indications that management is not performing up to par.
Working Capital Turnover (TTM) = Total Revenues (TTM, 4 Quarters) / the average of five quarters of working capital (Current Assets - Current Liabilities).
Working Capital Turnover (Quarterly) = Total Revenues / the average of two quarters of net working capital (Current Assets - Current Liabilities).