Working Capital Calculator
Working Capital Calculator
| Component | Amount |
|---|---|
| Current Assets | $150,000 |
| Current Liabilities | −$60,000 |
| Inventory | $30,000 |
| Accounts Receivable | $40,000 |
| Quick Assets (CA − Inventory) | $120,000 |
| Working Capital | $90,000 |
Summary Statistics
What Is Working Capital?
Working capital is the cash a business has available to run its day-to-day operations after covering short-term obligations. It is simply current assets minus current liabilities: the money tied up in inventory, receivables, and cash that will be converted or spent within the next twelve months, less the bills, supplier invoices, and short-term debt due in the same window. A positive figure means the business can pay its near-term obligations without selling long-term assets or borrowing. A negative figure signals a cash crunch where suppliers and employees may go unpaid. Lenders, investors, and suppliers all watch this number because it is the clearest single measure of a company's short-term financial health and its ability to survive a slow month.
How It Works
The core formula is Working Capital = Current Assets − Current Liabilities. Beyond that headline figure, analysts use liquidity ratios to judge how comfortably those obligations are covered. The current ratio divides total current assets by total current liabilities; a result between 1.5 and 2.0 is the traditional target. The quick ratio subtracts inventory before dividing, because inventory takes time to convert into cash and may sell at a discount; a quick ratio of 1.0 or higher is considered healthy. The cash ratio goes further and subtracts both inventory and receivables, measuring only cash-like assets against liabilities — the most conservative view, with readings of 0.2 to 0.5 being common. This calculator also shows net working capital as a share of total assets, which reveals how much of the balance sheet is tied up in short-term operations. Enter your asset and liability balances, press Calculate, and all four ratios update together so you can see the full liquidity picture at a glance.
Understanding Your Results
Read the verdict first: Strong means both the current and quick ratios clear their healthy thresholds, Stable means obligations are covered but the buffer is thin, and At Risk means current liabilities exceed what liquid assets can comfortably repay. Then compare the three ratios against each other. A strong current ratio but weak quick ratio means inventory is doing the heavy lifting — check how fast it turns over. A healthy cash ratio on top of that means genuine cash strength rather than paper assets. Watch the trend over several months rather than judging a single snapshot, and remember that seasonal businesses naturally swing between high and low working capital through the year. If working capital stays negative, prioritize collecting receivables, trimming inventory, and renegotiating payment terms with suppliers before growth spending.
Frequently Asked Questions
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