To remember
Anything in the 1.2 to 2.0 range is considered a healthy working capital ratio. If it drops below 1.0 you're in risky territory, known as negative working capital. With more liabilities than assets, you'd have to sell your current assets to pay off your liabilities.
Got a ratio over 2.0 and think you're golden? It's not quite that simple. Higher ratios aren't always a good thing. Anything above 2.0 could suggest that the business isn't using its assets to its full advantage.
Got a ratio over 2.0 and think you're golden? It's not quite that simple. Higher ratios aren't always a good thing. Anything above 2.0 could suggest that the business isn't using its assets to its full advantage.
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