Working Capital Calculator
Calculate your working capital and current ratio.
Assess your business liquidity and ability to meet short-term obligations.
Working capital is the money available to fund a business’s day-to-day operations. It represents the cushion between what you owe in the short term and what you can quickly access to pay it. Positive working capital means the business can cover its obligations; negative working capital is a warning sign.
Formulas:
Working Capital = Current Assets − Current Liabilities
Working Capital Ratio (Current Ratio): Current Ratio = Current Assets ÷ Current Liabilities
Quick Ratio (excludes inventory — more conservative): Quick Ratio = (Cash + Short-Term Investments + Accounts Receivable) ÷ Current Liabilities
What each variable means:
- Current Assets — assets convertible to cash within 12 months: cash, accounts receivable, inventory, prepaid expenses.
- Current Liabilities — obligations due within 12 months: accounts payable, short-term loans, accrued expenses, deferred revenue.
- Quick Ratio — removes inventory because it may take time to sell; more conservative view of liquidity.
Interpretation benchmarks:
- Current Ratio > 2.0: Very strong liquidity (may indicate idle assets)
- Current Ratio 1.5–2.0: Healthy
- Current Ratio 1.0–1.5: Adequate; monitor closely
- Current Ratio < 1.0: Danger zone — liabilities exceed near-term assets
- Quick Ratio > 1.0: Good; company can pay bills without selling inventory
Worked example: Current Assets: Cash $25,000 + Receivables $40,000 + Inventory $35,000 + Prepaid $5,000 = $105,000 Current Liabilities: Payables $30,000 + Short-term loan $20,000 + Accrued $8,000 = $58,000
Working Capital = $105,000 − $58,000 = $47,000 Current Ratio = $105,000 ÷ $58,000 = 1.81 (healthy) Quick Ratio = ($25,000 + $40,000) ÷ $58,000 = 1.12 (good)