Working Capital Ratio
Another name for the current ratio, comparing current assets to current liabilities to gauge a business's short-term financial cushion.
A working capital ratio above 1.0 indicates a business has more short-term assets than short-term liabilities, generally read as a sign of adequate cushion to meet obligations coming due within the year.
Businesses with a ratio well below 1.0 may still operate fine day-to-day, but lenders typically view it as a signal to look more closely at cash flow timing before extending additional debt.
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