Investments glossary

Working Ratio

The working ratio is a financial ratio used to measure a company’s ability to recover operating costs from annual revenue. A low, fractional working ratio is an indicator of a company’s financial sustainability. A small figure indicates expenses are eating up a small chunk of the company’s gross income and the company will have plenty of money to pay its bills. This ratio is calculated by taking the company’s total annual expenses (excluding depreciation and debt-related expenses) and dividing it by the annual gross income:

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