Determine Your Working Capital Requirements

Working capital is the amount you have remaining when current liabilities are subtracted from current assets. Whether a business has enough working capital is measured by the ‘current ratio’, or current assets divided by current liabilities. Generally, a current ratio of between 1.2 and 2 is considered the sign of a healthy business. If your current ratio is below 1.2, its an indicator that your business might have difficulties paying its bills. If it is above 2, its an indicator that your assets are not being put to their best use.