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Our small business accountants in Sydney explain Working Capital

When you start running a business, do you ever wonder what enables you to continue operations on a day-to-day basis, that’s your working capital. Our small business accountants in Sydney will explain working capital for you.

Working capital is the measure of a company’s efficiency and short-term financial health.

Working capital is calculated by: Current Assets – Current Liabilities

This ratio indicates whether a company has enough short-term assets to cover its short-term debt. If your ratio is below 1, it indicated a negative working capital, while anything over 2 means a business is not investing excess assets. Most business accountants believe that the ratio should be between 1.2 and 2.0 to be sufficient.

If you don’t know how to manage your working capital, be sure to speak to our small business accountants for some advice!