Series 6: 7.4.1.5.1. Measures Of Short-Term Financial Health

7.4.1.5.1. Measures of Short-Term Financial Health

• Working capital—current assets minus current liabilities. This is not a ratio but a dollar amount used to assess a company’s ability to meet its short-term commitments. A positive number means the company’s current assets are greater than its current liabilities and that it can likely meet its short-term commitments. A negative number suggests that it cannot. The exam may refer to working capital as net current assets.

• Current ratio—curren