Balance sheet ratios
The important ratios that arise from the Balance Sheet include working capital, liquidity, net worth, debtors turnover, return on assets and return on investment.

Working capital ratio

This ratio is also known as "the current ratio", and is one of the best-known measures of financial strength. The main question this ratio addresses is: "Does your business have enough current assets to meet the payment schedule of its current debts with a margin of safety for possible losses in current assets, such as stock shrinking or uncollectable debtors?"
A generally acceptable current ratio is 2:1; but whether or not a specific ratio is satisfactory, depends on the nature of the business and the characteristics of its current assets and liabilities. The minimum acceptable current ratio is obviously 1:1 but that relationship is usually playing it too close for comfort.
Because there is a time lag between paying for materials and labour used to produce your goods and the receipt of the cash for those goods, the business needs money to fund its day-to-day operations. This money is referred to as working capital and is represented by the difference between current assets and current liabilities.
The formula for working out your working capital ratio is as follows: Current Assets ($120,000) / Current Liabilities ($80,000) = 1.5 : 1.0

In this case it means that there is $1.50 available in current assets to meet every $1 of current liability.
This ratio is used by lenders as a guide to the soundness of a business because the greater the excess of current assets over current liabilities the better the position that the business is in to meet its commitments at least in the short term. Here are some of the things that you could do if you feel that your current ratio is too low:
• Pay off some debts.
• Increase your current assets by