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The Working Capital Ratio or Current Ratio is a financial ratio that measures whether or not a company has enough cash to pay off all the debt payments that are due over the next 1 year (12 months) It compares the organizations current assets and its current liabilities.

Formula:

WCR = Current Assets / Current Liabilities

Ex: Let us say ABC Corp has total assets of 5 crores and owes State Bank of India a loan of 3 crores to be repaid before the end of next year, the WCR for them would be

WCR = 5,00,00,000/3,00,00,000 = 1.66

This effectively means that, as of today ABC corp has 1.66 rupees for every rupee of debt it owes SBI.

Though this is good, an acceptable WCR in market terms is 2 or greater which shows that the company is sufficiently liquid and financially stable.

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Q: How do you calculate working capital ratio?
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Related questions

How can one calculate the working capital ratio?

One can calculate the working capital ratio by: Totalling ones current assets and current liabilities, working capital is calculated by subtracting the current assets from current liabilities. The ratio is calculated by dividing the current assets by the current liabilities.


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How do you calculate net working capital?


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This ratio refers how much amount invested for fixed assets from equity. Formula for calulating this ration:- Fixed Assets/Equity(Capital+Reserves+Other accumilated Profits) If the Ratio is .75 ie 75%of Equity spend for Fixed Assets, Hence we can calculate working Capital of the Company


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Incremental net working capital investment rate = Incremental working capital investment / Incremental sales.


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How do you calculate the working capital of a bank?

net working capital of bank is the difference of current asset and current liability of a bank.


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What is the purpose of working capital?

Working capital is defined as "a measure of both a company's efficiency and its short-term financial health." It is a ratio calculated with this formula: current assets - current liabilities = working capital.


How do you calculate working capital requirement?

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