![]() It measures the average number of days it takes for a company to collect its receivable balances. ![]() Days Sales Outstanding (DSO)ĭSO is calculated as accounts receivable divided by average daily sales. It measures how efficiently a company manages its inventory levels, with higher inventory turnover indicating better management and sales performance. Inventory turnover is calculated as cost of goods sold (COGS) divided by average inventory. A higher quick ratio indicates improved financial strength. It measures a company’s ability to meet its short-term obligations without relying on inventory sales. The quick ratio is calculated as (current assets – inventory) divided by current liabilities. A higher current ratio indicates better liquidity and financial health. This ratio indicates a company’s ability to pay its short-term obligations. The current ratio is calculated as current assets divided by current liabilities. Working Capital Metrics You Should Know 1. ![]() By shedding light on the core components and ratios involved, we aim to equip you with the knowledge and tools necessary to maximize your business’s working capital performance and unlock new opportunities for growth and success. In this comprehensive blog post, we will delve into the significance of working capital metrics, exploring their essential role in assessing a company’s financial health, cash flow, and operational efficiency. With financial success often reliant on an organization’s ability to manage these vital resources effectively, understanding and utilizing key working capital metrics is paramount. In today’s increasingly competitive and complex business landscape, maintaining and optimizing working capital has become more critical than ever.
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