Working capital per revenue is a financial metric used in fundamental analysis to evaluate a company's financial health and efficiency. It measures the amount of working capital available to cover a company's short-term operating expenses, relative to its revenue. Working capital is defined as the difference between a company's current assets and current liabilities. It is a measure of a company's liquidity and its ability to meet its short-term financial obligations.
The formula for working capital per revenue is as follows:
Working capital per revenue = working capital / revenue
A higher working capital per revenue ratio indicates that a company has more working capital available to cover its short-term operating expenses, relative to its revenue. This means that it has a stronger financial position and greater flexibility to invest in growth opportunities. On the other hand, a lower working capital per revenue ratio indicates that a company may be struggling to cover its short-term expenses, which can lead to financial difficulties if not managed properly.
Investors and analysts use this metric to identify companies that have a high level of liquidity and are able to meet their short-term obligations. It can also help to identify companies that may have financial difficulties if they have a low working capital per revenue ratio. By using working capital per revenue as part of their fundamental analysis, investors can make more informed investment decisions.
Working Capital Per Revenue
Fundamental Analysis Term
Working capital per revenue is a financial metric used in fundamental analysis to evaluate a company's financial health and efficiency. It measures the amount of working capital available to cover a company's short-term operating expenses, relative to its revenue. Working capital is defined as the difference between a company's current assets and current liabilities. It is a measure of a company's liquidity and its ability to meet its short-term financial obligations.
The formula for working capital per revenue is as follows:
Working capital per revenue = working capital / revenue
A higher working capital per revenue ratio indicates that a company has more working capital available to cover its short-term operating expenses, relative to its revenue. This means that it has a stronger financial position and greater flexibility to invest in growth opportunities. On the other hand, a lower working capital per revenue ratio indicates that a company may be struggling to cover its short-term expenses, which can lead to financial difficulties if not managed properly.
Investors and analysts use this metric to identify companies that have a high level of liquidity and are able to meet their short-term obligations. It can also help to identify companies that may have financial difficulties if they have a low working capital per revenue ratio. By using working capital per revenue as part of their fundamental analysis, investors can make more informed investment decisions.