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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: What is Working Capital Ratio or Current 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.


What are the most five important ratios for banks?

current raiot, working capital ratio, liquidity ratio, capital adequacy ratio, net asset ratio


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 figure a Current Ratio I know the formula for current ratio is CA divided by CL when you are given Net Working capital 2110 Current Liabilities 5530 and Inventory 1245?

Net working capital formula = Current assets - current liabilities 2110 = current asset - 5530 current assets = 5530 + 2110 current assets = 7640 Current Ratio = 7640/5530 = 1.38


Evaluation of a company's ability to pay current liabilities?

Use the following ratios to evaluate a company's ability to pay current liabilities: Working Capital Ratio Current Ratio Acid-test Ratio


How do you determine the working capital of a business?

Working Capital is calculated as follows Working Capital = Current Assets - Current Liabilities Current Assets = 100000 Current Liabilities = 50000 Working Capital = 50000 (Answer)


Formula of working capital?

Net working capital = current assets - current liabilities


What is the effect of a purchase of inventory on account on the current ratio and on working capital respectivelyAssume a current ratio greater than one prior to this transaction?

Purchase of inventory can either be on cash or credit. In the first case, while the value of your inventory would increase, your bank balance would decrease, leading to no change in the current assets and, therefore, no change in the current ratio as well. If goods are bought on credit, while your current assets will increase, so will your current liabilities (as you now owe creditors more), leading to no change in the current ratio, again. Due to the same reasons, whether the purchase was on cash or credit, the working capital also remains the same. If bought on cash, the value of inventory increase while cash decreases, leading to no change in the total current assets and, thus, no change in working capital. If goods are bought on credit, current assets increase and also current liabilities, leading to no change in the working capital, again.


Gross working capital?

Gross Working Capital = Current Assets Less Current Liabilities


What is difference between gross working capital and net working capital?

Gross working capital is the amount company invested in current assets while net working capital is the difference between current assets and current liabilities.


SDJ Inc has net working capital of 1410 current liabilities of 5810 and inventory of 1315 What is the current ratio what is the quick ratio?

I will not actually work the problem for you, however, I will give you the formula to find the current ratio and the quick ratio. Current Ratio = Current Assets / Current Liabilities The quick Ratio is Quick ratio = (current assets - inventories) / current liabilities Use the numbers you provided above to fill in the blanks and you should get the current ratios and quick ratios with no problem. / = divided by


What is working capital?

Working capital is a measure of a company's operational efficiency and short-term financial health, calculated by subtracting current liabilities from current assets. It represents the funds available for day-to-day operations and is important for assessing a company's liquidity and ability to cover short-term obligations. A positive working capital indicates that a company has more current assets than liabilities, while a negative working capital may suggest potential financial difficulties.