The ability to finance current oper

The ability to finance current operations = operating income / net working capital - This ratio shows how to effectively use the net working capital. Net working capital is not abalance sheet category, but analytical construction which is calculated as the difference between current assets and current liabilities. Net working capital shows how big is thecompany's ability to finance current operations and how the claims of creditors are protected. The small value of the ratio (close to zero) - can point to inefficient use ofworking capital. Great value of the ratio (either positive or negative) often shows too much volume of activities in terms of resources and is not favorable to creditors. Whenanalyzing this ratio, attention should be paid to working capital rather than income.Revenue cannot be negative, however, but the working capital can. When working capital has a large positive value, then the value of the ratio will be small and positive, which is good. Since the negative working capital is a bad sign, when the working capital is negative the value of the ratio will be small and negative, which is not good. Therefore, the smallest positive value of the ratio is the best and the lowest negative ratio value is the worst position. When the working capital has a small negative value, then the ratio will have a huge value, which is the best position in the event of a negative working capital.