Working Capital Ratio

A measure of a company's short-term liquidity, calculated by dividing current assets by current liabilities.

The Working Capital ratio, often referred to as the current ratio, is a financial metric that small business owners use to assess their company's short-term liquidity and ability to cover immediate liabilities by comparing current assets (such as cash, accounts receivable, and inventory) to current liabilities (such as accounts payable and short-term debt).