Computation of Working Capital:
A measure of both a company''s effectiveness and its short-term financial health. The working capital ratio is evaluated as:
This ratio shows whether a company has enough short term assets to cover its short term debt. Anything below 1 shows negative W/C (working capital). While anything over 2 seems that the company is not investing excess assets. Most consider that a ratio between 1.2 and 2.0 is sufficient.
Also described as "net working capital", or the "working capital ratio".