Calculating Working Capital Per Dollar of SalesHere's the formula for Working Capital per Dollar of Sales
Let's look at an example taken from an old annual report of Goodrich.
Sample Working Capital Per Dollar of Sales CalculationGoodrich provides systems for aircraft as well as manufacturers heavy-duty engines. Working Capital: $933,000,000 (current assets - current liabilities) Total Sales (found on the income statement) = $4,363,800,000
Let's plug the numbers into the formula:
Working Capital of $933,000,000 ÷ Total Sales of $4,363,800,000
The answer for Goodrich is .2138, or 21.38%. As a manufacturer of heavy duty machinery, GR falls within the 20-25% working capital per dollar of sales range. This is good and compares favorably to competitors.
This page is part of Investing Lesson 3 - Understanding the Balance Sheet. To go back to the beginning, see the Table of Contents. If you have already read this lesson, you can skip directly to the Balance Sheet Quiz.