|
|
Total Current Assets - Total Current Liabilities
|
| Working Capital to Total Assets =
|
|
|
|
Total Assets
|
Explanation of Working Capital to Total Assets:
The Working Capital to Total Assets ratio measures a company's
ability to cover its short term financial obligations (Total Current
Liabilities) by comparing its current assets to its Total Assets. This
ratio can provide some insight as to the liquidity of the company, since this
ratio can uncover the percentage of remaining liquid assets (with Total
Current Liabilities subtracted out) compared to the company's Total
Assets.
Importance of Working Capital to Total Assets:
An increasing Working Capital to Total Assets ratio is usually a positive sign,
showing the company's liquidity is improving over time. A low or decreasing
ratio indicates the company may have too many Total Current Liabilities,
reducing the amount of Working Capital available.
|