### Net Working Capital to Total Assets Ratio

Definition: Net Working Capital to Total Assets ratio is defined as the net current assets (or net working capital) of a corporation expressed as a percentage of its total assets.

Formula:

Net Working Capital to Total Assets = (Net Working Capital / Total Assets) * 100%

(Note: Net Working Capital = Current Assets - Current Liabilities)

Example 1:

If a company has total amount of current assets $16,000, total current liabilities $6,000, and total fixed assets $25,000, then the total assets would be: 16,000 + 25,000 = $41,000, the Net Working Capital to Total Assets ratio = [(16000 - 6000) / 41,000] * 100% = 24.39%

Example 2:

The following information relates to CPP Ltd:

Stock $20,000

Debtors $10,000

Bank $15,000

Cash $5,000

Land $30,000

Buildings $80,000

Accrued expenses $2,000

Creditors $3,000

Notes payable $1,000

Then,

Total currents assets = 20,000 + 10,000 + 15,000 + 5,000 = $50,000

Total current liabilities = 2,000 + 3,000 + 1,000 = $6,000

Net Working Capital = 50,000 - 6,000 = $44,000

Total Assets = Current Assets + Fixed Assets = 50,000 + 30,000 + 80,000 = $160,000

Net Working Capital to Total Assets = (44,000 / 160,000) * 100% = 27.5%

* Featured Articles:

How to Calculate Working Capital

Fixed Assets Turnover Ratio Example

Return on Net Assets (RONA) Ratio Analysis

Formula:

Net Working Capital to Total Assets = (Net Working Capital / Total Assets) * 100%

(Note: Net Working Capital = Current Assets - Current Liabilities)

Example 1:

If a company has total amount of current assets $16,000, total current liabilities $6,000, and total fixed assets $25,000, then the total assets would be: 16,000 + 25,000 = $41,000, the Net Working Capital to Total Assets ratio = [(16000 - 6000) / 41,000] * 100% = 24.39%

Example 2:

The following information relates to CPP Ltd:

Stock $20,000

Debtors $10,000

Bank $15,000

Cash $5,000

Land $30,000

Buildings $80,000

Accrued expenses $2,000

Creditors $3,000

Notes payable $1,000

Then,

Total currents assets = 20,000 + 10,000 + 15,000 + 5,000 = $50,000

Total current liabilities = 2,000 + 3,000 + 1,000 = $6,000

Net Working Capital = 50,000 - 6,000 = $44,000

Total Assets = Current Assets + Fixed Assets = 50,000 + 30,000 + 80,000 = $160,000

Net Working Capital to Total Assets = (44,000 / 160,000) * 100% = 27.5%

* Featured Articles:

How to Calculate Working Capital

Fixed Assets Turnover Ratio Example

Return on Net Assets (RONA) Ratio Analysis

Post a Comment