Working Capital Metric

Measure your organization's financial health by analyzing readily available assets.

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Financial KPI Example - Working Capital Metric

Overview

The Working Capital metric measures your organization's financial health by analyzing readily available assets that could be used to meet any short-term financial liabilities. Working capital includes assets such as on-hand cash, short-term investments, and accounts receivable to demonstrate the liquidity of the business (the ability to generate cash quickly). Working capital is calculated by subtracting current liabilities from current assets.

Key terms

  • Assets: An economic resource that has cash value.
  • Liability: A financial obligation that stems from previous transactions, such as a purchase order.

Success indicators

  • When expressed as a ratio, a working capital greater than 1 indicates that your company can cover its current liabilities.

See also

Related Metrics & KPIs

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