Sales to net working capital ratio

The ratio can highlight changes in the intensity of working-capital use, but it depends on the chosen balance and timing. A high value may indicate efficient use of funds or inadequate working capital and overtrading; it is not automatically favourable. Very small, negative or seasonal balances make interpretation difficult. Compare like periods and business models and examine the underlying inventory, receivables and payables movements. A year-end balance may not represent average funding throughout the year, so state the basis and use average information where available and appropriate.