What is the working capital ratio?
A working capital ratio is also sometimes referred to as the working capital or net working capital. The working capital ratio is defined as current assets minus current liabilities, so the working capital ratio is not really a ratio. It’s just simply a dollar amount.
The working capital ratio can mean just the current ratio of current assets divided by the amount of current liabilities. The latter definition is more technically correct that than the former definition because ratio should really be two numbers divided by each other.
Working capital ratio example
For example, if you have a million dollars in assets and half a million dollars in current liabilities, its work in capital is half a million dollars, and if a company has a million dollars with current assets and has a million dollars with the current liabilities, it doesn’t have any work in capital.