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.
Working capital is a business's blood as well as the oxygen that gives your business its every breath. In other words, working capital is what keeps your business alive and functioning. Working capital is obviously very important. Have you noticed that your business's cash flow is not as steady as you wish? Has it become difficult to pay for your business's day-to-day expenses? If so, you might be in need of working capital.
Net Capital Ratio =Total assets / Total Liabilities
It's the ratio of leverage to core capital at a bank, wikipedia has an excellent explanation
The quick (or acid-test) ratio equals current assets minus inventory divided by current liabilities. This ratio is used to evaluate liquidity and is often used in conjunction with the current ratio. The difference between the current ratio and the quick ratio tells you how much inventory may be tied up in current assets. Relatively large inventories are often a sign of short-term trouble.
The working capital can be constituted the , CASH, INVENTORY , RECEIVABLE , minus whatever a company owes in short term. these are the four and major elements of working capital.
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.
current raiot, working capital ratio, liquidity ratio, capital adequacy ratio, net asset ratio
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.
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
Use the following ratios to evaluate a company's ability to pay current liabilities: Working Capital Ratio Current Ratio Acid-test Ratio
Working Capital is calculated as follows Working Capital = Current Assets - Current Liabilities Current Assets = 100000 Current Liabilities = 50000 Working Capital = 50000 (Answer)
Net working capital = current assets - current liabilities
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 = Current Assets Less Current Liabilities
Gross working capital is the amount company invested in current assets while net working capital is the difference between current assets and current liabilities.
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
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.