Working Capital Efficiency Ratio

Professional Guide

This task helps accountants evaluate working capital efficiency by relating net working capital components to revenue. By combining receivables, inventory, and payables into a single ratio, finance teams gain a high-level view of liquidity utilization. The metric supports cash optimization initiatives and cross-period comparisons. It is particularly useful for management reporting and peer benchmarking. The formula is simple, auditable, and adaptable across business units. When tracked over time, it highlights structural improvements or emerging cash constraints. Accountants can extend it with rolling averages or segment-level analysis to support strategic decision-making.