Working capital is the amount you have remaining when current liabilities are subtracted from current assets. Whether a business has enough working capital is measured by the 'current ratio', or current assets divided by current liabilities. Generally, a current ratio of between 1.2 and 2 is considered the sign of a healthy business. If your current ratio is below 1.2, its an indicator that your business might have difficulties paying its bills. If it is above 2, its an indicator that your assets are not being put to their best use.
Determine Your Working Capital Requirements
Working Capital Requirements
Current Ratio
1.84
Current Working Capital
$ 15,250
Required Working Capital
$ 18,250
To meet your current ratio target of 2.00 you need to have working capital of $18,250, an increase of $3,000 from current levels. Over the course of the next 12 months, your working capital needs will increase to $20,360.