Types of Working Capital Management Ratios

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Moreover, small and mid-sized companies are seeing lower credit through trade payables. Consequently, all of that pressure is being put on cash from operations. Thanks to the supply chain constraints, most businesses have locked in more of their funds in inventories.

Limited availability of cash, poorly managed commercial credit policies, or constrained access to short-term financing can lead to the need for restructuring, asset sales, and even liquidation of a business. Therefore, to protect your company’s existence, you must understand the different types of working capital in financial management and ensure that your business venezuela phone number list doesn’t fall short of working capital. Always make sure your business possesses appropriate and adequate resources for its daily activities.


There are mainly three crucial ratios in working capital management. Here is a look at them:

Working Capital Ratio
It is obtained by dividing current assets by current liabilities. It reflects a company’s financial health. A working capital ratio of less than 1.0 shows that a company’s short-term debts may be causing trouble. On the other hand, working capital ratios of 1.2 to 2.0 are desirable because they reflect that a company’s current assets are greater than its liabilities. Meanwhile, a ratio of more than 2.0 shows that a company is not using its assets properly.