Fundamental Glossary / Working Capital & Operational Efficiency
Working Capital Turnover Ratio
Revenue divided by net working capital.
Formula
Revenue / average net working capital. Define working capital the same way each year, preferably inventory + receivables - payables.
What it means
The ratio says how many rupees of sales are supported by one rupee of working capital. Higher means a lighter cycle.
A negative working-capital business has a negative ratio, which is not "bad math" to be ignored. It means the cycle funds itself. Talk about the days instead of the negative multiple.
How to read it
A falling ratio on a positive working-capital base means more capital is required per rupee of sales. Growth will consume more cash than the old ratio suggested.
What to watch
Year-end working capital that has been window-dressed will overstate the turnover. Average the quarters if you can.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.