The ratio of working capital or current ratio is the ratio of current assets. And current liabilities Which indicates liquidity. Of the business in order to repay short-term debt.
If the ratio is less than 1 means that the business has more current liabilities than current assets. The problem may be short term debt. If this ratio is greater than 1, the business has enough current assets to repay short-term debt. But this ratio is greater than 1, it may mean that the efficiency of the asset is not good enough. However, certain current assets, such as inventories It may be worth decreasing if you rush to sell to pay off your debt. Maybe we can use a ratio that does not bring the inventory to be calculated or called “Quick ratio”
Current Ratio = Current Assets (CA) / Current Liabilities (CL)
Success Indicator: Current ratio is between 1.5 and 3.