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Definition
The working capital ratio is another name for the current ratio — current assets divided by current liabilities. It measures whether a business's short-term assets cover its short-term debts, giving a quick read on liquidity.
In plain terms
A ratio above 1 means short-term assets exceed short-term liabilities; around 1.5 is often comfortable, though the ideal varies by sector. It is one of the first numbers a lender or director looks at to gauge financial health.
Why it matters
The working capital ratio is a headline liquidity measure. See current ratio and quick ratio.
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