Working Capital productivity |
Working capital productivityThis measures how effectiveness of the business' use of its working capital. In other words how effectively does management or business owners use their working capital? This metric is important because it shows you how effectively your business spends available money compared to its sales or turn over. Thus it can be calculated as follows: Working Capital productivity = Sales/(current assets - current liabilities) Thus, let us say that your sales figure is $4000, your current assets are $2000, while your current liabilities are $700. WCP = 4000/(2000 - 700) = 4000/(1300) = 3.08 The higher this number is, the better. It shows that your sales are growing much faster than resources required to generate them, which from a business perspective is always a good thing. |
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Net Working Capital
Net Working Capital in business Finance terms is defined as the business' current assets less(minus) the current liabilities. If the business' Net working Capital is positive, it means that the business will have or has enough