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calculation of ratio working capital period whether can be :
ratio calculation :
1. working capital / sales x 365 days ? or
2. working capital / cost of sales or operating costs x 365 days ? and
what is included in the working capital?
thank youThere is no such thing as “ratio working capital period”.
There is the working capital ratio (normally called current ratio) which is current assets / current liabilities.
There is the working capital period (or working capital cycle) which is receivables days plus inventory days less payables days.
it identifies how long it takes to convert the purchase of inventories into cash from sales and is calculated as :
working capital / sales x 365 days ?
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