Working Capital Calculator
Calculate your business's working capital and assess liquidity. Working capital measures the short-term financial health of your business by comparing current assets to current liabilities.
Current Assets
Current Liabilities
Working Capital Results
Net Working Capital:
$0.00
Current Ratio:
0.00:1
Liquidity Status:
N/A
Asset & Liability Breakdown
Total Current Assets:
$0.00
Total Current Liabilities:
$0.00
Working Capital Ratio:
0.00%
Financial Health Indicators
Quick Ratio:
0.00:1
Cash Ratio:
0.00:1
Overall Health:
N/A
Understanding Working Capital
Working capital is the difference between a company's current assets and current liabilities. It represents the funds available for day-to-day operations and is a key indicator of a company's short-term financial health and liquidity.
What is Working Capital?
Definition
- Current Assets minus Current Liabilities
- Funds available for daily operations
- Measures short-term liquidity
- Critical for business survival
Importance
- Cash flow management
- Operational efficiency
- Financial stability
- Growth potential
Working Capital Formula
Working Capital Calculations
Key formulas for working capital analysis
Net Working Capital:
- NWC = Current Assets - Current Liabilities
- Positive NWC = excess liquidity
- Negative NWC = potential liquidity issues
- Zero NWC = balanced position
Current Ratio:
- Current Ratio = Current Assets ÷ Current Liabilities
- Measures short-term liquidity
- Industry standard: 1.5:1 to 2:1
- Higher ratio = better liquidity
Current Assets & Liabilities
Current Assets:
- Cash and cash equivalents
- Accounts receivable
- Inventory
- Prepaid expenses
- Short-term investments
Current Liabilities:
- Accounts payable
- Short-term debt
- Accrued expenses
- Taxes payable
- Current portion of long-term debt
Liquidity Ratios
Quick Ratio (Acid Test):
- Quick Ratio = (Cash + Receivables) ÷ Current Liabilities
- Excludes inventory from current assets
- More conservative liquidity measure
- Ideal ratio: 1:1 or higher
Cash Ratio:
- Cash Ratio = Cash ÷ Current Liabilities
- Most conservative liquidity measure
- Shows immediate payment ability
- Very low ratios indicate problems
Interpreting Working Capital
Positive Working Capital:
- Assets exceed liabilities
- Good liquidity position
- Ability to meet obligations
- Room for growth and investment
Negative Working Capital:
- Liabilities exceed assets
- Potential liquidity issues
- May indicate operational problems
- Requires careful cash management
Industry Benchmarks
| Industry | Current Ratio | Quick Ratio | Working Capital Trends |
|---|---|---|---|
| Manufacturing | 1.5-2.5:1 | 0.8-1.5:1 | Stable to growing |
| Retail | 1.2-2.0:1 | 0.6-1.2:1 | Seasonal fluctuations |
| Technology | 2.0-3.0:1 | 1.5-2.5:1 | Strong growth focus |
| Construction | 1.1-1.8:1 | 0.4-1.0:1 | Project-based cycles |
Managing Working Capital
Optimizing Assets:
- Improve accounts receivable collection
- Optimize inventory levels
- Manage cash efficiently
- Reduce excess assets
Managing Liabilities:
- Negotiate better payment terms
- Optimize supplier relationships
- Manage debt levels
- Control expense timing
Working Capital Cycle
Operating Cycle:
- Time to convert cash to inventory
- Convert inventory to receivables
- Convert receivables back to cash
- Overall cash conversion time
Cash Conversion Cycle:
- Operating cycle minus payables period
- Time cash is tied up in operations
- Shorter cycle = better efficiency
- Key working capital metric
Working Capital Trends
Monitoring Changes:
- Track ratios over time
- Compare with industry peers
- Identify seasonal patterns
- Monitor cash flow impacts
Improvement Strategies:
- Implement working capital policies
- Use technology for automation
- Regular financial reviews
- Cash flow forecasting
Key Takeaways for Working Capital
- Working capital is the difference between current assets and current liabilities
- Positive working capital indicates good liquidity; negative working capital may signal problems
- Current ratio measures short-term liquidity with industry standards of 1.5:1 to 2:1
- Quick ratio provides a more conservative liquidity measure by excluding inventory
- Working capital management involves optimizing assets and liabilities
- Cash conversion cycle measures how long cash is tied up in operations
- Industry benchmarks vary significantly by sector and business model
- Regular monitoring of working capital trends is essential for financial health