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Working Capital Turnover

The final ratio in this section is the working capital turnover ratio - the relationship between turnover and working capital.

The working capital turnover ratio is straightforward and here it is!

What this ratio tries to highlight is how effectively working capital is being used in terms of the turnover it can help to generate: no ideal values here but the higher the better, surely. Working with the Carphone Warehouse, we have:

Oops, then much better! In 2000, the result of the working capital turnover ratio was strange because year-end working capital (net current liabilities in this case) was negative - it's difficult to interpret such a ratio. In 2001, though, it had turned this situation round and returned a value of 11.92 times.

The best way to understand what this ratio means is to calculate it a few times. Let's start with Vodafone and take it from there.

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