Working capital and current ratio are two important metrics used to measure a company’s financial performance and ability to sustain operations. Working capital is calculated by subtracting the company’s current liabilities from its current assets. The higher the value, the more liquid and strong the company is. Current ratio, on the other hand, measures a company’s ability to pay off its short-term debt with its current assets. It is calculated by dividing the current assets by current liabilities. A consistently high current ratio indicates that a business has adequate liquid assets to make payments on time. Understanding these key metrics can help you better assess the soundness of a company’s finances.