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current ratio and quick ration.
The best ratio to use would be the current ratio.
The working capital ratio (Current Assets/Current Liabilities) indicates whether a company has enough short term assets to cover its short term debt. Anything below 1 indicates negative W/C (working capital). While anything over 2 means that the company is not investing excess assets.
liquidity ratio just as some has said
The entire Current Assets, Current Liabilities and collection cycle has to be analysed for arriving at the Working Capital Finance requirements of a Company; however if it has to be just one ratio, it will be Current ratio as its calculation inputs are imperative for any working capital finance assessment.
Hi,
I don't think there is one ratio by which we get to know about WC finance requirement of a company.
However, as the basic rule goes:
(Bank finance + Sundry creditors + Other current liabilities + Net working Capital) / TCA =1
Each parameter BF/TCA, S.Cr/TCA etc. will have to be fixed w.r.t the industry and thus we can arrive at the Working Capital Requirement.
liquidity ratio
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