Working Capital Ratio
Calculator
Results
- Working capital (current) ratio
- 1.6
- Working capital
- 180,000
Results
| Working capital (current) ratio | 1.6 |
| Working capital | 180,000 |
formula-map diagram
- Working capital (current) ratio
- 1.6
- Working capital
- 180,000
Formula breakdown
Formula
Current ratio = Current assets ÷ Current liabilities= 1.6
Note
This is a simplified model. Results use standard textbook definitions and ignore taxes, seasonality, attribution lag, discounting and accounting policy differences. Use them as an estimate, not as accounting, tax or investment advice.
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See all →Frequently asked questions
What is the working capital ratio and how is it calculated?+
The working capital ratio (also called current ratio) is calculated as current assets / current liabilities. It measures a company's ability to cover its short-term obligations (due within a year) using assets that can be converted to cash within the same timeframe.
What does a working capital ratio below 1 indicate?+
A ratio below 1 means current liabilities exceed current assets, signaling that a company may struggle to meet its short-term obligations without raising additional financing or selling longer-term assets — a warning sign for liquidity problems.
Is a higher working capital ratio always better?+
Not necessarily — a very high ratio (like 3 or above) can indicate the company is holding too much idle cash or excess inventory instead of reinvesting it productively, so an ideal ratio (often cited as 1.5 to 2) balances liquidity safety with efficient use of capital.
What's included in current assets and current liabilities for this calculation?+
Current assets typically include cash, accounts receivable, and inventory — anything expected to convert to cash within a year — while current liabilities include accounts payable, short-term debt, and accrued expenses due within the same period.
How is the working capital ratio different from the quick ratio?+
The quick ratio (or acid-test ratio) excludes inventory from current assets before dividing by current liabilities, since inventory can be slow or uncertain to convert to cash, making the quick ratio a stricter, more conservative measure of immediate liquidity than the working capital ratio.