Working Capital Calculator
Working capital = Current Assets − Current Liabilities. It's the lifeblood of a business — the money available to fund daily operations. This calculator computes your working capital, current ratio (overall liquidity), and quick ratio (immediate liquidity), helping you spot cash flow problems before they become crises.
Frequently Asked Questions
What is a healthy current ratio?+
A current ratio between 1.5 and 2.0 is generally considered healthy — assets cover liabilities 1.5–2× over. Below 1.0 means current liabilities exceed current assets (working capital deficit) — a liquidity risk. Above 3.0 may indicate idle assets. The ideal ratio varies by industry: retail is typically lower (0.5–1.0) due to fast inventory turns; manufacturing higher (1.5–2.5).
What is the quick ratio and why does it differ from current ratio?+
The quick ratio excludes inventory and prepaid expenses — assets that can't be quickly converted to cash. Formula: (Cash + Receivables) / Current Liabilities. A quick ratio ≥ 1.0 means you can meet all current obligations with liquid assets alone. A quick ratio of 0.8 but current ratio of 1.8 means you rely on inventory liquidation to meet obligations.
What causes working capital problems?+
Common causes: (1) Slow-paying customers extending receivables, (2) Excess inventory tying up cash, (3) Rapid growth outpacing capital (overtrading), (4) Seasonal business with fixed costs, (5) Lenders reducing credit limits. Signs: delayed supplier payments, overdraft dependence, inability to take new orders.
How can I improve working capital?+
Key levers: (1) Speed up collections — invoice immediately, offer early payment discounts, (2) Extend payment terms with suppliers (carefully), (3) Reduce inventory levels with JIT/demand forecasting, (4) Arrange a working capital line of credit before you need it, (5) Don't over-invest fixed assets from operating cash flow.