Working Capital Calculator

Current Assets

Cash & Cash Equivalents ($):

Accounts Receivable ($):

Inventory ($):

Other Current Assets ($):

Current Liabilities

Accounts Payable ($):

Short-Term Debt ($):

Accrued Expenses ($):

Other Current Liabilities ($):

Understanding Working Capital

Working capital is a fundamental measure of a company's short-term financial health and operational efficiency. It represents the difference between current assets and current liabilities, showing whether a business has enough liquid assets to cover its short-term obligations.

The Working Capital Formula

Working Capital = Current Assets - Current Liabilities

This simple formula reveals how much capital is available for day-to-day operations after all short-term obligations are met.

What Are Current Assets?

Cash & Cash Equivalents: Money in bank accounts and short-term investments
Accounts Receivable: Money owed by customers for goods/services sold on credit
Inventory: Goods available for sale or raw materials
Prepaid Expenses: Payments made in advance for future services

What Are Current Liabilities?

Accounts Payable: Money owed to suppliers and vendors
Short-Term Debt: Loans and credit lines due within one year
Accrued Expenses: Wages, taxes, and other obligations not yet paid
Unearned Revenue: Payments received for services not yet delivered

Understanding the Working Capital Ratio

The working capital ratio (current ratio) is calculated as Current Assets / Current Liabilities. A ratio above 1.0 indicates positive working capital, while below 1.0 suggests potential liquidity issues.

Below 1.0: May struggle to pay short-term obligations
1.0 - 1.5: Generally acceptable, but tight
1.5 - 2.0: Healthy financial position
Above 2.0: Strong liquidity, but may indicate inefficient use of assets

Why Working Capital Matters

Adequate working capital ensures a business can meet its operational needs, pay employees, purchase inventory, and handle unexpected expenses. It's crucial for maintaining smooth business operations and taking advantage of growth opportunities.