Working Ratio

AAA

DEFINITION of 'Working Ratio'

A ratio used to measure a company's ability to recover operating costs from annual revenue. 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:

Working Ratio

INVESTOPEDIA EXPLAINS 'Working Ratio'

A working ratio below 1 implies that the company is able to recover operating costs, whereas a ratio above 1 reflects the company's inability to do so.

RELATED TERMS
  1. Quick Ratio

    An indicator of a company’s short-term liquidity. The quick ratio ...
  2. Income Tax

    A tax that governments impose on financial income generated by ...
  3. Gross Income

    1. An individual's total personal income before taking taxes ...
  4. Earnings Before Interest, Taxes, ...

    An indicator of a company's financial performance which is calculated ...
  5. Working Capital Turnover

    A measurement comparing the depletion of working capital to the ...
  6. Earnings

    The amount of profit that a company produces during a specific ...
RELATED FAQS
  1. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  2. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  3. How can a company execute a tax-free spin-off?

    The two commonly used methods for doing a tax-free spinoff are either to distribute shares of the spinoff company to existing ... Read Full Answer >>
  4. How are American Depository Receipts (ADRs) priced?

    The price of an American depositary receipt (ADR) is determined by the bank or other financial institution that issues it. ... Read Full Answer >>
  5. How can EV/EBITDA be used in conjunction with the P/E ratio?

    Because they provide different perspectives of analysis, the EV/EBITDA multiple and the P/E ratio can be used together to ... Read Full Answer >>
  6. How can a company reduce the unsystematic risk of its own security issues?

    Companies can reduce the unsystematic risk of their own security issues simply by doing the most effective job possible of ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Ratio Analysis Tutorial

    If you don't know how to evaluate a company's present performance and its possible future performance, you need to learn how to analyze ratios.
  2. Insurance

    Working Capital Works

    A company's efficiency, financial strength and cash-flow health show in its management of working capital.
  3. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  4. Fundamental Analysis

    Do Stock Splits Cause Volatility?

    Since stock splits decrease the stock price, do they also increase volatility because shares are traded in smaller increments? Investopedia examines assumptions about this increasingly common ...
  5. Investing

    Is It Time To Buy Commodities?

    Despite the news, the Athens Stock Exchange is down less than 5 percent year-to-date, while the Shanghai Composite remains up more than 10 percent.
  6. Fundamental Analysis

    Burger King and Tim Hortons Are Better Together

    In August 2014, 3G Capital announced that it was merging Burger King with Canadian coffee chain Tim Hortons to form Restaurant Brands International.
  7. Fundamental Analysis

    Macau: Not Your Father's Gambling Destination

    Macau has given Las Vegas casinos a run for their money, but what's behind the scenes? Here's an overview of Macau's gambling industry.
  8. Professionals

    DCF Vs. Comparables: Which One To Use

    DCF and Comparables models are widely used in equity valuation. We explain the pros and cons of each method.
  9. Investing

    Is There Still Opportunity in Japanese Stocks?

    Japanese stocks’ strong performance has prompted market watchers to question whether there’s still a case for adding exposure to the Land of the Rising Sun
  10. Fundamental Analysis

    American Express Returns Vs. DJ Industrial Average

    American Express has handily outperformed the Dow Jones Industrial Average since 2009, but unusual weakness in the last year is taking its toll.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!