What it is:

This ratio tells how much of a company's funds are tied up in inventory. It is preferable to run your business with as little inventory as possible on hand, while not affecting potential sales opportunities

When to use it:

Keeping track of inventory levels is crucial to determining the financial health of your business. If this number is high compared to the average for your industry, it could mean your business is carrying too much inventory.

The formula:

Inventory divided by net working capital.

Calculate your inventory to net working capital