Explanation of Inventory to Working Capital:

The Inventory to Working Capital ratio measures how well the company is able to generate cash using Working Capital at its current inventory level. 

Importance of Inventory to Working Capital

An increasing Inventory to Working Capital ratio is generally a negative sign, showing the company may be having operational problems.  If a company has too much Working Capital invested in Inventory, they may have difficulty having enough Working Capital to make payments on Short-Term Liabilities and Accounts Payable.  This is a great ratio to be used with several others to really pick apart the inner workings of a company. 

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