![]() ![]() Thus, Tesla had enough liquidity to cover its short-term obligations and invest in its growth. The formula for calculating the operating cycle is the sum of days. The working capital turnover ratio is calculated as follows: net annual sales divided by the average amount of working capital during the same year. ![]() ![]() Days Sales Outstanding (DSO) (Average Accounts Receivable Revenue) × 365 Days. This means that Teslas working capital at the end of 2022 was 14.2 billion (40.9 billion - 26.7 billion 14.2 billion). Below are the formulas for calculating the two working capital metrics: Days Inventory Outstanding (DIO) ( Average Inventory Cost of Goods Sold) × 365 Days. It is calculated by adding the value of inventory at the end of a period to the value of inventory at the end of the prior period and dividing the sum by 2. In 2022, the company reported 40.9 billion in total current assets and 26.7 billion in current liabilities. The normative Working Capital Requirement Recorded average payment time of invoices, Delay of inventory turnover, Average payment time of supplier invoices. Below are the steps an analyst would take to forecast NWC using a schedule in Excel. Secondly, average value of inventory is used to offset seasonality effects. Some companies may use sales instead of COGS in the calculation, which would tend to inflate the resulting ratio. In the above example, as we can see, the working capital is 126 days, which denotes the company can recover its total invested working capital in 144 days. Analysts use COGS instead of sales in the formula for inventory turnover because inventory is typically valued at cost, whereas the sales figure includes the company’s markup. The industry average of non-cash working capital is currently running at 10. Inventory Turnover = Average Value of Inventory COGS where: COGS = Cost of goods sold Ĭost of goods sold (COGS) is also known as cost of sales. They are currently earning annual revenue of 40 million with an NCWC maintained at 15 of the annual earnings which is 6 million. Investopedia / NoNo Flores Inventory Turnover Formula and Calculation ![]()
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