This teaching note has two objectives. First, it explores the limitations of the traditional measures of working capital management presented in the financial ratio analysis component of a typical accounting curriculum. Second, it presents an additional or alternative measure based on early work in the finance literature. Three current asset and liability accounts are combined into a single “Merchandising Ratio,” which provides a measure of the net effect of a firm's working capital management strategy. Data from a sample of retailing companies demonstrate how the merchandising ratio can be used to enhance students' analytical skills.
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Research Article| May 01 1999
The Merchandising Ratio: A Comprehensive Measure of Working Capital Strategy
Jane M. Cote, Assistant Professors;
Issues in Accounting Education (1999) 14 (2): 255–267.
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Jane M. Cote, Claire Kamm Latham; The Merchandising Ratio: A Comprehensive Measure of Working Capital Strategy. Issues in Accounting Education 1 May 1999; 14 (2): 255–267. doi: https://doi.org/10.2308/iace.1922.214.171.124
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