Working capital ratio

This ratio helps investors understand a company’s liquidity.
In this we compare the company’s current assets and its current liabilities.
Working capital ratio = (company’s current assets) / (company’s current liabilities).
Let’s say a company’s current assets (cash, inventory, bank balance) are worth Rs 2,000 cr.And its total current liabilities (short-term debts) are worth Rs 500 cr
So working capital ratio = 2000 / 500 = 4