Working capital turnover
In one sentenceNet sales divided by average working capital, showing how many riyals of sales each riyal invested in day-to-day operations generates.
Simply put
Working capital is the money tied up in inventory and with customers, minus what you owe suppliers. This ratio asks: is this money working efficiently?
A high ratio is usually good, but if it comes from very thin working capital, it may be a sign of liquidity pressure rather than efficiency.
Worked example
A spare parts store has annual sales of 3,000,000 SAR, and its average working capital during the year was 600,000 SAR.
Net sales3,000,000 SAR
Average working capital600,000 SAR
Ratio = 3,000,000 ÷ 600,0005 times
Formula: Net sales ÷ average working capital
Don't confuse it with
Asset turnover ratioIt divides sales by all assets, including fixed assets; this ratio is limited to net current assets and liabilities.