Net Working Capital Ratio Formula is a metric used to measure the short-term financial health of a company by measuring its ability to pay off its obligations. To calculate the net working capital ratio, one subtracts the current liabilities from the current assets of a company and divides that result by the total current liabilities. The resulting number indicates how well the company can meet its financial obligations in the short-term and should be above 1.0 to indicate good financial health. A company with a ratio below 1.0 may struggle to stay afloat in the near future as it will need to borrow money to pay off its creditors. It is important to keep an eye on this metric and take corrective action if needed.