Curious Cat Investing Dictionary: Working Capital

Working Capital (net current assets, current capital): current assets minus current liabilities.

Related terms:
  • current ratio (current asset ratio): current assets divided by current liabilities. A measure of liquidity for the company. Often a ratio of 1.5 to 2.0 is considered best but it really depends on the type of business and other factors. A ratio below 1 means the company owes more in the next year than it has in current assets (which normally is a bad situation ,but, as usual, exceptions exist to such a statement).
  • quick ratio: (current assets - inventory)/current liabilities. A more conservative measure used because inventory may not necessarily be liquid for the price listed on the balance sheet (depending on market conditions)
  • income statement
  • balance sheet
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