Register now or log in to join your professional community.
Yes indeed, The working capital ratio (Current Assets/Current Liabilities) indicates whether a company has enough short term assets to cover its short term debt. Anything below1 indicates negative W/C (working capital). While anything over2 means that the company is not investing excess assets. Most believe that a ratio between1.2 and2.0 is sufficient. Also known as "net working capital". Adequacy of levels of working capital vary by company type, industry, stage of growth and operational efficiency. For example, a rapidly growing company in the same industry with revenues similar to another company may have significantly higher working capital needs. A company experiencing rapid growth may have working capital needs that fluctuate significantly and should therefore add a buffer amount to its acceptable level. The quality of the short-term assets on the balance sheet impacts working capital. For example, a company that requires customer deposits and has strong receivables collection procedures will need less working capital than one whose customers regularly pay in or days.
I apologized for the answer I did not understand the question