Working capital to revenue expresses working capital as a percentage of trailing twelve-month revenue. It measures how much working capital a company needs per dollar of annual sales. A lower ratio indicates the business model requires less working capital to operate, which generally means more efficient cash generation.
Working Capital to Revenue = Working Capital / Revenue (TTM)
GeminIQ divides Working Capital (Current Assets − Current Liabilities) by trailing twelve-month Revenue, both from SEC filings. The denominator uses TTM revenue to properly scale the quarterly balance sheet figure against a full year of sales.
A: Below 10% is considered efficient for most industries. Above 20% may indicate excess capital is tied up in operations. Negative values (common for subscription and retail businesses) indicate the company generates cash from its operating cycle faster than it needs to reinvest it.
A: Working capital is a balance sheet snapshot, while revenue is a flow measure. Using TTM revenue (four quarters) rather than quarterly revenue properly scales the two — dividing a balance sheet figure by a single quarter's revenue would overstate the ratio by roughly 4x.
A: Any difference in how current assets, current liabilities, or revenue are classified propagates into this ratio. GeminIQ uses as-filed values for all inputs.