In a company, business people certainly need a working capital ratio to finance the company’s operations. To find out how healthy the business conditions have been, you need to know about the working capital ratio in your company.
In this article, I will describe the definition of the working capital ratio or what is commonly called the liquidity ratio, the types of ratios, why the working capital ratio is important, how to calculate it and what to do with this information.
Definition of Working Capital Ratio
By definition, the working capital ratio is a description of the short-term financial position in the form of a measure of the smooth operation of a company in one year.
In every business process, companies need working capital in the form of cash or non-cash assets that can be disbursed to finance the company’s operations.
Working capital is often known as the company’s current …