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Peerview Data Insights

Most Important Metrics: Net Working Capital Ratio

What's more important, today or tomorrow? For most companies, one big struggle is not just balancing short-term needs with long-term goals and priorities, but figuring out a good, simple way to track how well that's going. 

  • KPI: Net Working Capital Ratio
  • DEFINITION: Net Working Capital Ratio measures your company's financial health and whether your current holdings can cover short term expenses. 
  • FORMULA: (Total Current Assets – Total Current Liabilities) ÷ Total Assets = Net Working Capital Ratio
  • BENCHMARK: A positive value that's increasing over time is considered good
  • SIGNIFICANCE: The Net Working Capital Ratio can have both current and future implications depending on whether it's positive or negative, and increasing or decreasing over time.
  • RECOMMENDATION: If your Net Working Capital Ratio is negative or low, consider increasing liquidity. 

About This Series:

Companies are generating more data than ever before, but most of it just sits there. Getting good insights from it is often too hard, too costly or just takes too much timeThat's too bad because the benefits of being data-driven are substantial. (See The ROI of Big Data, Analytics & Benchmarking for more.) Part of the reason we developed our Big Data, analytics and benchmarking software was to solve this problem so CEOs and senior managers could get the data-driven insights they need to leverage strengths, strengthen weaknesses, identify threats and exploit opportunities. This series of blog posts examines the individual performance metrics that make up that analysis.

For more information on the value of measuring financial ratios, read here.

Topics: KPIs Net Working Capital Ratio company measurement