Formula
to calculate working capital:
Working
Capital = current assets - current liabilities.
Formula
to calculate working capital:
Working Capital Ratio = current
assets / current liabilities
The working capital ratio
is also referred to as the current ratio. See
current ratio definition
and explanation.
Working
capital definition and explanation:
Working
capital is the liquid reserve available to satisfy
contingencies and uncertainties.
A high
working capital balance is needed if the business is
unable to borrow on short notice.
Banks
look at working capital over time to determine a
company's ability to weather financial crises.
Loans often
specify minimum working capital requirements.
The working capital calculation included in the financial
statement ratio analysis spreadsheets highlighted in the
left column, which provide formulas, definitions,
calculation, charts and explanations of each ratio.
The working capital calculation is listed in our liquidity
ratios.
The working capital and other ratios are key
to understanding financial statements. Our
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Spreadsheets to
calculate ratios (includes formulas, definitions,
explanations and charts):
See list
of ratios , or the financial statement ratio
analysis spreadsheets which are not highlighted in the
left column, to see which other ratios our spreadsheets
calculate, define and explain.
The working capital
may be included in our
custom 1, 3 or 5 period financial
statement ratio analysis spreadsheet.
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