Finance & Business
Working Capital Calculator - Calculate Current Ratio & Liquidity
Calculate working capital, current ratio, quick ratio, and cash conversion cycle. Analyze business liquidity and short-term financial health for better cash flow management.
Use Working Capital Calculator - Calculate Current Ratio & Liquidity to get instant results without uploads or sign-ups. Everything runs securely in your browser for fast, reliable output.
Your results will appear here.
About this tool
Our Working Capital Calculator is the most comprehensive free tool for analyzing business liquidity and short-term financial health. Working capital - the difference between current assets and current liabilities - measures your ability to pay bills, fund operations, and handle unexpected expenses. Positive working capital means you have enough liquid assets to cover short-term obligations. Negative working capital signals potential cash flow problems and inability to meet obligations. Understanding working capital and related liquidity ratios is essential for financial management, securing financing, and ensuring business survival.
Working Capital = Current Assets - Current Liabilities. Current assets include cash, marketable securities, accounts receivable (money owed by customers), inventory, and prepaid expenses. Current liabilities include accounts payable (money owed to suppliers), short-term debt, accrued expenses, and taxes payable. Healthy working capital varies by industry - service businesses need less (minimal inventory), manufacturing needs more (materials and finished goods), retail highly seasonal (inventory buildup before peak season). The calculator shows not just the dollar amount but key ratios that reveal financial efficiency.
Current Ratio = Current Assets ÷ Current Liabilities shows ability to pay short-term obligations. A ratio of 2:1 means $2 of current assets for every $1 of current liabilities - generally healthy. Ratios under 1:1 indicate potential liquidity problems. Above 3:1 may signal inefficient use of assets. Quick Ratio (Acid Test) = (Current Assets - Inventory) ÷ Current Liabilities measures immediate liquidity without relying on inventory sales. More conservative than current ratio. Healthy quick ratios are 1:1 or higher. Our calculator computes both, helping you understand liquidity from multiple angles.
Cash Conversion Cycle measures how long cash is tied up in operations. Formula: Days Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding. Lower is better - faster you convert inventory and receivables to cash, less working capital needed. Negative cycle means you collect from customers before paying suppliers (ideal). The calculator shows detailed breakdown of each component and identifies opportunities to improve cycle time. It's completely free, requires no registration, perfect for CFOs, business owners, accountants, lenders, and investors evaluating financial health.
Usage examples
Healthy Retail Business
$200K assets, $100K liabilities, $300K inventory
Working Capital: $100K, Current Ratio: 2:1, Quick Ratio: 1:1, Healthy
Cash-Strapped Startup
$50K assets, $80K liabilities
Working Capital: -$30K, Current Ratio: 0.625:1, Liquidity crisis
Service Business
$150K assets (minimal inventory), $75K liabilities
Working Capital: $75K, Current Ratio: 2:1, Quick Ratio: 2:1, Strong
Manufacturing Company
$500K assets, $250K liabilities, 45-day cash cycle
Working Capital: $250K, Current Ratio: 2:1, Cycle: 45 days
How to use
- Enter current assets: cash, accounts receivable, inventory
- Input current liabilities: accounts payable, short-term debt
- Add sales revenue and COGS for cycle calculations
- Specify payment and collection terms
- View working capital, ratios, and liquidity analysis
- Compare results to industry benchmarks
Benefits
- Calculate working capital amount
- Current ratio analysis
- Quick ratio (acid test) calculation
- Cash conversion cycle metrics
- Days inventory outstanding (DIO)
- Days sales outstanding (DSO)
- Days payable outstanding (DPO)
- Liquidity health assessment
- Industry benchmark comparisons
- Instant what-if scenario analysis
- No registration required - free
- Essential for financial management
FAQs
What is working capital and why does it matter?
Working capital = Current Assets - Current Liabilities. It measures your ability to pay short-term obligations and fund daily operations. Positive working capital means you can pay bills, buy inventory, and handle emergencies. Negative means you may struggle to meet obligations - high risk of insolvency. Adequate working capital prevents: missed payments to suppliers, payroll problems, emergency high-interest borrowing, forced asset sales. Businesses fail from lack of cash, not lack of profit. Managing working capital is critical for survival and growth.
What is a good current ratio?
Current Ratio = Current Assets ÷ Current Liabilities. Generally: 1.5:1 to 3:1 is healthy. Under 1:1 signals liquidity problems - not enough assets to cover obligations. 1:1 to 1.5:1 is acceptable but tight. Over 3:1 may indicate inefficiency - excess inventory or receivables, underutilized cash. Ideal ratios vary by industry: Retail 1.5-2:1, Manufacturing 2-3:1, Services 1.5-2.5:1. Compare to industry benchmarks and track trends. Declining ratio signals deteriorating financial health.
What is the quick ratio and how is it different from current ratio?
Quick Ratio (Acid Test) = (Current Assets - Inventory) ÷ Current Liabilities. It measures immediate liquidity without relying on selling inventory. More conservative than current ratio. Inventory can be slow to convert to cash or obsolete. Quick ratio shows if you can pay bills TODAY. Healthy quick ratio: 1:1 or higher. Example: $200K current assets, $100K inventory, $100K liabilities. Current ratio: 2:1 (good). Quick ratio: 1:1 (acceptable). If quick ratio < 1:1, you rely on inventory sales to meet obligations - risky.
What is the cash conversion cycle?
Cash Conversion Cycle (CCC) measures days from spending cash (buying inventory/paying suppliers) to collecting cash (customer payment). Formula: Days Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding. Example: 30 days inventory + 45 days receivables - 30 days payables = 45-day cycle. Lower is better - less working capital tied up. Negative cycle is ideal - collect before you pay. Improve by: reducing inventory, speeding collections, extending payables (carefully). CCC directly impacts cash needs and profitability.
How can I improve my working capital position?
Improve assets: Accelerate collections (invoice promptly, follow up, offer early payment discounts), reduce inventory (just-in-time, better forecasting, eliminate slow-movers), convert non-essential assets to cash. Manage liabilities: Negotiate longer payment terms with suppliers, consolidate/refinance short-term debt, delay non-critical purchases. Improve operations: increase sales (more revenue), improve margins (more profit per sale), reduce operating expenses. Consider: working capital loans for growth, factoring receivables for immediate cash. Focus on cash conversion cycle reduction.
Can working capital be negative?
Yes, but it's generally bad. Negative working capital means current liabilities exceed current assets - you owe more short-term than you have to pay with. Signals: cash flow problems, difficulty meeting obligations, high insolvency risk. Exception: Some businesses operate successfully with negative working capital (Amazon, fast-food franchises) by collecting from customers before paying suppliers - requires unique business model. For most businesses, negative working capital requires immediate action: cut costs, accelerate collections, secure financing, or restructure operations.
Related tools
View all toolsBreak-Even Analysis Calculator - Calculate Break-Even Point
Calculate break-even point in units and revenue. Analyze fixed costs, variable costs, and pricing to determine when your business becomes profitable. Includes margin of safety and target profit analysis.
Finance & BusinessBusiness Valuation Calculator - Estimate Company Worth
Calculate business valuation using multiple methods: earnings multiplier, revenue multiplier, asset-based, and DCF. Get accurate company worth estimates for buying, selling, or investment decisions.
Finance & BusinessCash Flow Calculator - Calculate Operating Cash Flow
Calculate operating cash flow, free cash flow, and cash flow projections. Analyze cash inflows, outflows, and runway. Essential for business financial planning and management.
Finance & Business