Ratio of Working Capital To Capital Employed - SS2 Accounting Lesson Note

The ratio of working capital to capital employed is a financial metric that measures the proportion of a company's working capital (the funds needed to support day-to-day operations) in relation to its total capital employed (the total funds invested in the business).

This ratio helps us understand how much of a company's total investment is dedicated to supporting its day-to-day operations. A higher ratio typically indicates that a larger portion of a company's capital is invested in its day-to-day operations, while a lower ratio suggests that a company has more of its capital invested in long-term assets or other types of investments.

This ratio is important for investors and analysts as it helps to assess a company's financial health, its ability to manage its cash flow, and its overall efficiency in utilizing its resources to generate profits.