Source: https://guthlabs.ai/docs/instruments/working-capital-liquidity-ratios/mechanism/

instrument mechanism / verified-clean

# Working Capital & Liquidity Ratios mechanism

The inspectable method record for Working Capital & Liquidity Ratios, kept separate from implementation and qualification.

Status: **VERIFIED_CLEAN**Lifecycle: **verified-clean**

## Model scope

The formulas are mathematically correct under the stated assumptions, and the educational estimate label is appropriate. Review is required because the input units and quick-ratio asset-eligibility convention are not explicitly defined. Add validation for positive current liabilities, inventory inclusion within current assets, consistent currency/scale, and same-date balance-sheet inputs.

- current_ratio=CA/CL is the standard current ratio when current assets and current liabilities are measured in the same currency and CL is nonzero.

- WC=CA-CL is the standard working-capital formula under the same-period balance-sheet assumption.

- quick_ratio=(CA-inventory)/CL is a valid simplified quick-ratio convention, but many standard definitions also exclude prepaid expenses and other non-quick current assets; the instrument must explicitly state this convention.

## Units and conventions

- Current assets, current liabilities, and inventory must use the same currency and scale, such as all USD or all USD thousands.

- The figures must be from the same balance-sheet date.

- Inventory is assumed to be included in current assets and not greater than current assets.

- Current liabilities must be nonzero for both ratios; working capital itself does not require division.

- The reported working-capital currency unit matches the input currency unit.

## Inspectable vector

One of 4 source-bound review vectors:

````
{
  "inputs": {
    "current_assets": 125000,
    "current_liabilities": 50000,
    "inventory": 30000,
    "currency": "USD"
  },
  "expected_outputs": {
    "current_ratio": 2.5,
    "quick_ratio": 1.9,
    "working_capital": 75000,
    "working_capital_currency": "USD"
  },
  "working": "current ratio = 125000 / 50000 = 2.5; quick assets = 125000 - 30000 = 95000; quick ratio = 95000 / 50000 = 1.9; working capital = 125000 - 50000 = 75000 USD."
}
````

## Failure boundary

**BREAK_CLAIMED** · SELF_FLAGGED

A zero-current-liabilities input makes both ratios undefined. The instrument must reject CL=0 or return an explicit undefined result rather than dividing by zero or displaying a misleading finite value.

## Other records

[01**Overview**](<https://guthlabs.ai/docs/instruments/working-capital-liquidity-ratios/>)[03**Implementation**](<https://guthlabs.ai/docs/instruments/working-capital-liquidity-ratios/implementation/>)[04**Qualification**](<https://guthlabs.ai/docs/instruments/working-capital-liquidity-ratios/qualification/>)

## Sources and evidence

These pointers bind the page to evidence. They do not grant authority or collapse verification into deployment.

- `VERIFIED_LEDGER.json`

- `evidence-tranche5/tranche5-results.json`

- `BOUNDARY_HAZARD_CATALOG.json`