Term:Working Capital [WC]« Back to Glossary Index
Working capital is a measure of both a company’s efficiency and its short-term financial health. Working capital is calculated as: Working Capital equals Current Assets minus Current Liabilities. The working capital ratio (Current Assets/Current Liabilities) indicates whether a company has enough short term assets to cover its short term debt. Anything below 1 indicates negative working capital. While anything over 2 means that the company is not investing excess assets. Most believe that a ratio between 1.2 and 2.0 is sufficient.