Working Capital Calculator
Easily calculate your company's working capital and ratio to evaluate financial stability and liquidity. Working capital is the difference between your current assets and liabilities. This is a key metric that shows how efficiently your business can cover short-term obligations.
Cash, inventory, accounts receivable, etc.
Accounts payable, short-term debt, etc.
Formula
Working Capital = Current Assets – Current Liabilities
Working Capital Ratio = Current Assets ÷ Current Liabilities
< 1.0
Poor liquidity (may struggle to pay obligations)
1.0 – 1.5
Adequate but should be improved
1.5 – 2.0
Healthy financial condition
> 2.0
Very strong but may indicate unused capital
- Indicates liquidity and operational efficiency
- Helps identify potential cash flow problems early
- Useful for lenders and investors evaluating your business
- Shows ability to meet short-term obligations
- • Increase accounts receivable collection
- • Reduce inventory levels
- • Negotiate better payment terms with suppliers
- • Increase sales and profitability
- • Secure long-term financing for assets
Working capital is the difference between your current assets and current liabilities. It measures your business's short-term financial health and ability to pay day-to-day expenses. Positive working capital indicates you can meet short-term obligations, while negative working capital suggests potential liquidity problems.
What is a good working capital ratio for a small business?
A good working capital ratio for small businesses is typically between 1.5 and 2.0. This indicates sufficient liquidity to cover short-term obligations while maintaining operational efficiency.
How do you calculate working capital?
Working capital is calculated by subtracting current liabilities from current assets. The formula is: Working Capital = Current Assets - Current Liabilities.
What happens if working capital is negative?
Negative working capital indicates that current liabilities exceed current assets, suggesting the business may struggle to meet short-term obligations and could face liquidity problems.
How can I improve my working capital?
Improve working capital by increasing cash flow, collecting receivables faster, reducing inventory, negotiating better payment terms, and securing long-term financing for capital assets.