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Working Capital Ratio

What is Working Capital Ratio (WCR)?

Working capital ratio (WCR) helps businesses assess their ability to pay current liabilities. More specifically, this liquidity metric determines how many times a company’s current assets can offset these liabilities.

To find your company’s WCR, complete this formula:

WCR = current assets/current liabilities

Once you’ve calculated this ratio, you can use it to assess your business’s financial health:

  • If your WCR is below 1, your company is unable to pay its current liabilities.
  • If your WCR is between 1 and 1.9, your business is in a good place financially and should have no trouble meeting its current liabilities.

If your WCR is above 2, your company has idle cash it can leverage to increase its cash flow.

Related terms

3 Way Match
3-way matching refers to a three-step process of matching three key documents before processing a payment to a supplier.
30-Day and 13-Week Operating Cash Burn
30-day and 13-week operating cash burn are also known as the “burn rate.” These are the rates at which a business consumes its cash reserves when it isn’t bringing in profit. 
Account Reconciliation
Account reconciliation is the process of comparing two sets of records to ensure their accuracy and consistency.
Accounts Payable
Accounts payable (AP) refers to the amount of money that a business owes to its suppliers or creditors for goods or services purchased on credit.
Accounts Payable Automation
Accounts payable automation (AP Automation) refers to the use of technology and software solutions to streamline and optimize the accounts payable process within an organization.
Accounts Payable Days
Accounts Payable Days (AP Days), also referred to as Days Payable Outstanding (DPO), is a financial ratio that measures the average time a company takes to pay its suppliers or vendors for credit purchases.