![]() ![]() Net sales ÷ ((Beginning working capital + Ending working capital) / 2) Example of the Working Capital Turnover RatioĪBC Company has $12,000,000 of net sales over the past twelve months, and average working capital during that period of $2,000,000. The calculation is usually made on an annual or trailing 12-month basis, and uses the average working capital during that period. ![]() The Asset Turnover ratio can often be used as an indicator of the. Note: Fixed Asset Turnover Ratio Formula (Sales / PPE) Below is a table with turnover ratio figures. Asset turnover ratio measures the value of a company’s sales or revenues generated relative to the value of its assets. To calculate the ratio, divide net sales by working capital (which is current assets minus current liabilities). The formula is straightforward and is given below. How to calculate PPE turnover depends on all three of these assets. Conversely, a low ratio indicates that a business is investing in too many accounts receivable and inventory assets to support its sales, which could eventually lead to an excessive amount of bad debts and obsolete inventory write-offs. Price-Earnings Ratio - P/E Ratio: The price-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings. PPE turnover ratio, or fixed asset turnover, tells you how many dollars of sales your company receives for each dollar invested in property, plant and equipment (PPE). A high turnover ratio indicates that management is being extremely efficient in using a firm's short-term assets and liabilities to support sales. Working capital is current assets minus current liabilities. The working capital turnover ratio measures how well a company is utilizing its working capital to support a given level of sales. What is the Working Capital Turnover Ratio? ![]()
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