Sales / working capital = Sales to working capital ratio I don't understand this statement. According to the instructor: If the sales decreases assuming working capital were to stays the same, why would the sales to working capital ratio spike? That's not how it comes out on a calculator. If sales were 40 and working capital was 10 Sales / working capital = 4 If sales were decreased to 30 and working capital was 10 Sales / working capital = 3 In this example above, the decrease in sales resulted in a decline in the ratio. This screenshot does not make sense to me.
To Clarify my post above One thing I noticed in the video was, the instructor says: "The less working capital a company chooses to use, the higher it's sales to working capital ratio will be and visa vers." I can see how the decline or spike would correspond to this screenshot above. I think I got mixed up on his wording. Basically he is saying, "you can use this ratio and if you notice an increase or decrease in sales, the ratio spike or decline will reflect the fact that the company choose to use less or more working capital". Sorry, I think I figured this out
