Free tool
Working capital calculator
Enter the current assets and current liabilities from your balance sheet, and your inventory if you hold any. The calculator shows working capital, the current ratio and the quick ratio, with the formulas below the form. With JavaScript on, the figures you type stay in your browser.
Updated
Your working capital
Working capital
90,000.00
Current ratio 1.60
Quick ratio 1.20
Quick assets (current assets less inventory) 180,000.00
Ratios rounded to two decimals.
Working capital
With no current liabilities there is nothing to divide by, so the current and quick ratios are not defined. Working capital equals your current assets.
How it is calculated
working capital = current assets - current liabilities current ratio = current assets / current liabilities quick ratio = (current assets - inventory) / current liabilities
Worked example, with illustrative figures. Current assets of 240,000, of which 60,000 is inventory, against current liabilities of 150,000. Working capital is 240,000 - 150,000 = 90,000.00. The current ratio is 240,000 / 150,000 = 1.60, and the quick ratio, without the inventory, is 180,000 / 150,000 = 1.20.
The quick ratio here is the common shortcut that removes inventory only. A stricter version also leaves out prepaid expenses: add them to the inventory field to get it.
How to read the result
- Positive working capital, a current ratio above 1: what should turn into cash within a year covers what falls due within a year.
- A quick ratio well below the current ratio: much of the cover is stock, which has to be sold, and then collected, before it pays a bill.
- Negative working capital is not always trouble. A business paid in advance, such as a subscription billed annually, carries that money as deferred revenue: an obligation to deliver, not a bill to pay.
- More is not always better. A very high ratio can mean cash sitting idle, invoices left uncollected or stock that is not selling.
- There is no single right number. Compare the figure with your own previous months and with what your lenders ask for, if they set a covenant.
Related measures: working capital, the current ratio and the quick ratio. To see how fast working capital turns back into cash, try the cash conversion cycle calculator and the DSO calculator.
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Questions
How is working capital calculated?
Working capital = current assets - current liabilities. Current assets are what should turn into cash within a year, such as cash, receivables and inventory; current liabilities are what falls due within a year, such as supplier bills, taxes and short-term loan repayments.
What is the difference between the current ratio and the quick ratio?
The current ratio divides all current assets by current liabilities. The quick ratio leaves inventory out first, because stock has to be sold, and the sale collected, before it can pay a bill.
Is negative working capital always bad?
No. A business paid in advance, for example for annual subscriptions, holds that cash as deferred revenue, a current liability, so its working capital can be negative while its cash is healthy. For most other businesses it means bills due within a year exceed what will come in, and deserves a cash forecast.
What if I have no current liabilities?
Then both ratios divide by zero and are not defined. The calculator shows working capital, which equals your current assets, and says why the ratios are missing.