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Working Capital

Working capital is basically a tool for measuring the liquidity of a company. By subtracting Current asset and current liability, there we can get the working capital.

Other way to measure is by using the ratio, bydividing current asset and current capital, if the result is below 1, it means that the company isn't liquid enough, on the other hand if the result is more than 2, that means the company isn't investing excess asset.

Basically working capital ratio is one way to measure whether the company is liquid enough to pay the short term debt.

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Category: Business

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