How should a business use working capital analysis?

A business should use working capital analysis to measure and compare its current financial stability. This includes looking at the liquidity of a business, which is the ability to quickly convert assets into cash. Ratios such as the Current Ratio or Quick Ratio can be used to analyze short-term debt obligations compared to available resources. Additionally, long term financial stability should also be evaluated through measures such as Debtors/Creditor Analysis or Total Assets Turnover, in order for management to identify any potential areas of risk that need improvement or changes made. Finally, working capital analysis can help track business performance over time by measuring growth in different areas including sales and inventory levels.