About the Working Capital Calculator
Working capital is the money a business has available to run day-to-day operations: current assets (cash, receivables, inventory) minus current liabilities (payables, short-term debt, accrued expenses). Positive working capital means you can pay bills due in the next year from assets that turn into cash within the year; negative working capital means you depend on new sales, credit or financing to stay current.
Enter each current asset and liability from your balance sheet. The calculator returns net working capital, the working capital (current) ratio, the quick ratio, and — if you enter annual revenue — working capital as a percentage of sales, a useful figure for budgeting how much cash growth will absorb.
Owners use it to plan for seasonal peaks and growth, lenders use it in credit decisions and covenants, and buyers use it to set the working capital target in a business acquisition.
With the default inputs, the net working capital is $125,000.00. Change any value above to recalculate instantly.
How to use the working capital calculator
- 1Open your latest balance sheet.
- 2Enter each current asset: cash, receivables, inventory and other current assets.
- 3Enter each current liability: payables, short-term debt and accrued expenses.
- 4Optionally enter annual revenue to see working capital as a share of sales.
- 5Track the result monthly to spot a tightening cash position early.
Formula and method
Current assets are resources expected to become cash within a year: cash, accounts receivable, inventory and prepaid or other short-term assets. Current liabilities are obligations due within a year: accounts payable, short-term borrowing, the current portion of long-term debt and accrued expenses. The difference is net working capital.
The working capital ratio (also called the current ratio) expresses the same relationship as a multiple. The quick ratio counts only cash and receivables. Working capital as a percentage of revenue shows how much cash each dollar of annual sales ties up in operations.
- Current assets
- Cash + receivables + inventory + other current assets
- Current liabilities
- Payables + short-term debt + accrued liabilities
Worked examples
Healthy distributor
Current assets of $250,000 minus current liabilities of $125,000 leaves $125,000 of net working capital, a 2.0 ratio. Cash and receivables alone ($130,000) cover liabilities 1.04 times, and working capital equals about 10.4% of $1.2M revenue.
Negative working capital
Current assets of $60,000 fall short of $80,000 in current liabilities, so net working capital is −$20,000 and the ratio is 0.75. The business needs sales receipts or new financing to meet obligations as they come due.
Frequently asked questions
What is a good working capital ratio?+
A ratio between about 1.2 and 2.0 is often considered healthy. Below 1.0 signals possible trouble paying short-term bills; well above 2.0 can mean cash or inventory is not being used efficiently.
Can working capital be negative and still be fine?+
Yes, for some businesses. Grocery chains, restaurants and subscription companies collect cash before paying suppliers, so they can run negative working capital safely. For most small businesses, though, it is a warning sign.
How can I improve working capital?+
Collect receivables faster, hold less slow-moving inventory, negotiate longer supplier terms, refinance short-term debt into long-term loans, or retain more profit in the business.
What is the difference between working capital and cash flow?+
Working capital is a snapshot of short-term assets and liabilities on one date. Cash flow measures money moving in and out over a period. Increases in working capital consume cash, which is why fast-growing companies can run short.
Is working capital the same as the current ratio?+
They use the same inputs. Net working capital is the dollar difference between current assets and liabilities; the current ratio is the same comparison expressed as a multiple.