Stock-working capital ratio establishes relationship between stock and working capital. Alternatively it is known as "Inventory-working capital ratio". This ratio shows the extent to which the working capital is blocked in inventories. This ratio highlights the predominance of stocks in current financial position of organization. A higher ratio indicates week working capital. This ratio is the indicator of the adequacy of working capital. Standard stock working capital ratio is 1:1
Formula:
Stock Working Capital Ratio= Stock/Working Capital
Components:
1) Stock (closing stock)
2) Working capital I.e. current assets less current liabilities.
It can be expressed in percentage also by multiplying this ratio by 100.
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