Glossary Terms

Working Capital Ratio

Working capital ratio is calculated by dividing a business’ current assets by current liabilities.

Working capital ratio is calculated by dividing a business’ current assets by current liabilities.

The working capital ratio score indicates whether a company has enough capital to cover its short-term debt. A score below 1 suggests negative working capital, while a score over 2 implies the company is not properly investing excess assets. Scores between 1 and 2 indicate good financial health.