Working Capital (%)
Working Capital = (Current Assets - Current Liabilities)/Total Assets
Shows the percentage of Total Assets that is Working Capital.
The degree to which the company holds on to capital to run the business. It can also be said that this is the capital that the company needs to finance its day-to-day operations.
The company needs working capital to pay for purchases, salaries and liabilities. In the short term, this shows that the company is stable and has good liquidity.
Working Capital is calculated through Current Assets - Current Liabilities. By dividing Working Capital by Total Assets, you get an estimate of the proportion of the company's total assets that is made up of Working Capital.
Working capital varies depending on the industry.
Things to keep in mind
- High value is good.
- 50% say that half of the company's Total Assets are readily available as Working Capital.