Working capital ratio
Key performance question this indicator helps to answer
How well are we managing our cash flow?
Why is this indicator important?
We discussed the importance of cash flow in our previous KPI. The simple truth is that in order to build the business an organisation needs a healthy supply of cash. Without readily available cash an organisation will struggle to grow and will equally be challenged to fund day-to-day operational activities. To understand the cash position, organisational leaders will typically use the working capital ratio as another key cash-flow measure.
In essence, working capital (also referred to as current position) is a measure of current assets minus ...