Working Capital Calculator
Calculate working capital and the current ratio from your current assets and liabilities.
A key measure of short-term financial health.
What Is Working Capital?
Working capital is the money a business (or individual) has available to meet day-to-day obligations. It is the difference between current assets and current liabilities.
The Formulas
Working Capital = Current Assets − Current Liabilities
Current Ratio = Current Assets ÷ Current Liabilities
Current assets are assets that can be converted to cash within one year:
- Cash and bank balances
- Accounts receivable (money owed to you)
- Inventory
- Prepaid expenses
Current liabilities are obligations due within one year:
- Accounts payable (money you owe suppliers)
- Short-term loans
- Accrued expenses
- Current portion of long-term debt
Interpreting the Current Ratio
| Current Ratio | Meaning |
|---|---|
| Below 1.0 | Negative working capital, liquidity risk |
| 1.0 – 1.5 | Tight, enough to survive but little buffer |
| 1.5 – 2.0 | Healthy, standard for most businesses |
| 2.0 – 3.0 | Strong, comfortable liquidity position |
| Above 3.0 | May indicate inefficient use of capital |
Practical Example
A business has:
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Cash: $30,000
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Accounts receivable: $45,000
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Inventory: $25,000
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Total current assets: $100,000
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Accounts payable: $20,000
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Short-term loans: $15,000
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Accrued expenses: $5,000
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Total current liabilities: $40,000
Working Capital = $100,000 − $40,000 = $60,000 Current Ratio = $100,000 ÷ $40,000 = 2.5
This is a healthy position — the business can easily cover its short-term obligations.
Why Working Capital Matters
Even profitable businesses fail due to poor cash flow. Maintaining adequate working capital ensures you can pay suppliers, employees, and bills while waiting for customers to pay. Lenders also check working capital when evaluating business loan applications.
The Quick Ratio (More Conservative)
The current ratio counts inventory as a near-cash asset, which is generous. Inventory takes time to sell, and if you’re suddenly short on cash, it might not move fast enough or might only move at a discount. The quick ratio (also called the acid-test ratio) strips inventory out:
Quick Ratio = (Cash + Short-term Investments + Accounts Receivable) ÷ Current Liabilities
A quick ratio above 1.0 means a business can cover its short-term obligations without having to sell inventory at all. Manufacturers and retailers carry heavy inventory by nature and often have quick ratios well below 1.0 even with healthy current ratios — that’s normal for the industry. Service businesses and software companies typically run much higher quick ratios because they have little inventory to begin with.
How we build and check this calculator
This calculator runs entirely in your browser, so the numbers you enter stay on your device. The math behind it is written by hand and tested against worked examples and standard references before the page goes live.
SuperGlobalCalculator is independently built and maintained. See how we build and verify our calculators.