Working Capital Ratio
The working capital ratio is a synonym for the current ratio: current assets divided by current liabilities. A ratio above 1.0 indicates the company has more current assets than current liabilities.
The relationship to working capital
“Working capital” (absolute difference) = Current assets − Current liabilities.
The “working capital ratio” (percentage) = Current assets ÷ Current liabilities.
Positive working capital means the company has more liquid assets than short-term debts.
See also
Closely related
- Current ratio — identical metric
- Quick ratio · Cash ratio — stricter tests
- Working capital — the absolute dollar amount