The working capital ratio, also known as the current ratio, is a financial metric that measures a company's ability to cover its short-term liabilities with its short-term assets. A higher ratio indicates better liquidity and financial health, as it suggests that the company has enough assets to pay off its debts. This concept is closely linked to the operating cycle and cash conversion cycle, as it reflects how effectively a company manages its operational assets and liabilities to maintain cash flow.
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