Financial Metrics - Working Capital Ratios
Sales can solve a lot of business problems. Sustainable business are built upon sound policies concerning current assets and supported by sufficient working capital. The following ratios can be used to evaluate a business's net working capital:
- Working Capital Turnover
- Current Debt to Net Worth
- Funded Debt to Net Working Capital
Net Sales / Net Working Capital = Working Capital Turnover Ratio
Current Debt to Net Worth - measures the proportion of funds that current creditors contribute to your operations.
Current Liabilities / Tangible Net Worth = Current Debt to Net Worth Ratio
Funded Debt to Net Working Capital - long term debt should not exceed net working capital.
Long-Term Debt / Net Working Capital = Funded Debt to net Working Capital Ratio