The working capital ratio is calculated simply by dividing total current assets by total current liabilities. For that reason, it can also be called the current ratio. It is a measure of liquidity, meaning the business's ability to meet its payment obligations as they fall due.

What is a good working capital ratio formula?

What's a Healthy Working Capital Ratio? Anything in the 1.2 to 2.0 range is considered a healthy working capital ratio. If it drops below 1.0 you're in risky territory, known as negative working capital. With more liabilities than assets, you'd have to sell your current assets to pay off your liabilities.

What is the formula for working capital turnover ratio?

The formula for calculating working capital turnover ratio is: Working capital turnover = Net annual sales / Working capital. In this formula, the working capital is calculated by subtracting a company's current liabilities from its current assets.