Working Capital Calculator
Liquidity, current ratio and quick ratio.
Reviewed by the Calculation Machine team · Updated 24 October 2026 · How we check our maths
Your values
ⓘ Live results
- Working capital
- $140,000.00
- Current ratio
- 1.78
- Quick ratio
- 1.25
- Health
- Positive liquidity
Quick answer
Working capital is current assets minus current liabilities — the cushion a business has to pay bills due within a year. The current ratio divides the two, and the quick ratio leaves out inventory. With $320,000 of current assets (including $95,000 of inventory) and $180,000 of current liabilities, working capital is $140,000, the current ratio 1.78 and the quick ratio 1.25.
What the Working Capital calculator does
This calculator takes three balance-sheet figures — current assets, inventory and current liabilities — and returns net working capital, the current ratio and the quick (acid-test) ratio, with a simple liquidity verdict. Business owners use it to check they can cover upcoming payments, lenders use it when assessing a loan, and investors use it to compare companies.
All three figures come from the balance sheet at a single date, so the result is a snapshot. A seasonal business can look very different at its peak and in its quiet months; compare the same point in each year, or average several month-end balances.
Working capital tells you how much cushion exists, not how fast cash moves through it. Pair it with the cash conversion cycle and inventory turnover to see whether stock and receivables are tying up more cash than they should.
The formula
Working capital = current assets − current liabilities Current ratio = current assets ÷ current liabilities Quick ratio = (current assets − inventory) ÷ current liabilities
| Symbol | Meaning | Unit |
|---|---|---|
| current assets | Cash, short-term investments, accounts receivable, inventory, prepaid expenses — anything expected to turn into cash within 12 months | $ |
| inventory | Raw materials, work in progress and finished goods held for sale | $ |
| current liabilities | Accounts payable, accrued expenses, short-term loans, the current portion of long-term debt, deferred revenue — obligations due within 12 months | $ |
These are standard liquidity measures in financial-statement analysis; current assets and liabilities are classified under accounting standards (US GAAP ASC 210, IFRS IAS 1) as items settled within one year or the operating cycle. A stricter quick ratio also excludes prepaid expenses, which cannot be used to pay bills; this calculator removes inventory only.
Worked examples
Manufacturer with healthy liquidity
A small manufacturer has $320,000 of current assets, $95,000 of it inventory, against $180,000 of current liabilities.
Inputs
- Current assets320000 $
- Inventory95000 $
- Current liabilities180000 $
Result
- Working capital$140,000.00
- Current ratio1.78
- Quick ratio1.25
- HealthPositive liquidity
A current ratio of 1.78 and a quick ratio of 1.25 mean the business could pay all its short-term obligations even without selling any stock. Most lenders would see this as comfortable.
Retailer heavy on stock
A shop has $85,000 of current assets, but $60,000 of that is inventory, against $70,000 of current liabilities.
Inputs
- Current assets85000 $
- Inventory60000 $
- Current liabilities70000 $
Result
- Working capital$15,000.00
- Current ratio1.21
- Quick ratio0.36
- HealthPositive liquidity
Working capital is positive at $15,000, but the quick ratio of 0.36 shows the shop can only meet its bills if stock keeps selling. A slow season or a supplier demanding faster payment would squeeze it quickly.
Subscription business with negative working capital
A software company holds $1.2 million of current assets, including $150,000 of hardware inventory, against $1.35 million of current liabilities, most of it customer prepayments recorded as deferred revenue.
Inputs
- Current assets1200000 $
- Inventory150000 $
- Current liabilities1350000 $
Result
- Working capital-$150,000.00
- Current ratio0.89
- Quick ratio0.78
- HealthLiquidity shortfall
Working capital is −$150,000 and the current ratio 0.89. That is not necessarily a warning sign here: customers pay upfront, and deferred revenue is settled by providing the service rather than paying out cash.
How to read the current and quick ratios
Healthy levels vary by industry, so compare against businesses like yours rather than a single rule. As a general guide:
| Ratio | Below 1.0 | 1.0 – 2.0 | Above 2.0 |
|---|---|---|---|
| Current ratio | Short-term obligations exceed liquid assets; check cash flow closely | Typical comfortable range for many businesses | Strong liquidity, but cash or stock may be sitting idle |
| Quick ratio | Relies on selling inventory to pay bills | Can cover bills without selling stock | Very liquid; possibly too much cash held |
When negative working capital is normal
Some business models run with negative working capital by design:
- Restaurants and grocers sell for cash or card immediately but pay suppliers 30 days or more later.
- Subscription and software companies collect annual fees in advance, creating large deferred-revenue liabilities.
- Large retailers turn inventory faster than they pay for it.
In these cases suppliers and customers are effectively funding operations. The risk is growth slowing: if new sales fall, the incoming cash that covers old liabilities shrinks. For a business that sells on credit or holds slow-moving stock, negative working capital is a genuine warning.
Common ways to improve working capital
- Collect receivables faster: invoice promptly, offer a small early-payment discount, and chase overdue accounts.
- Hold less inventory: reorder smaller quantities more often and clear slow lines.
- Lengthen supplier terms where you can do so without losing discounts.
- Refinance short-term debt into longer-term loans, which moves it out of current liabilities.
- Avoid funding long-term assets from an overdraft, which drains working capital meant for day-to-day bills.
Operating profit, measured by EBITDA, is what replenishes working capital over time; these steps only change its timing.
How to use the Working Capital Calculator
- 1Take total current assets from the balance sheet (cash, receivables, inventory, prepaid items).
- 2Enter the inventory figure on its own so the quick ratio can exclude it.
- 3Enter total current liabilities, including the portion of long-term loans due in the next 12 months.
- 4Read working capital and both ratios, and compare them with prior periods or industry peers.
Frequently asked questions
What is a good working capital ratio?
A current ratio between about 1.2 and 2.0 is often regarded as healthy for many businesses. Lower can be normal in fast-turning cash businesses; much higher can mean cash or stock is not being put to use.
What is the difference between working capital and the current ratio?
Working capital is a dollar amount (assets minus liabilities); the current ratio is the same comparison as a ratio (assets divided by liabilities). The ratio is easier for comparing companies of different sizes.
Why does the quick ratio exclude inventory?
Inventory can take months to sell and may only sell at a discount in a hurry. Leaving it out shows whether a business can meet its bills from cash and receivables alone.
Is cash included in working capital?
Yes, cash is a current asset and is usually the largest part of a small business's working capital. Some analysts calculate a separate non-cash working capital figure to see how much is tied up in receivables and stock.
Can working capital be too high?
Yes. A very large surplus can mean excess cash earning little, customers paying slowly, or unsold stock building up. Each of those has a cost even though liquidity looks strong.
References
- ASC 210, Balance Sheet (classification of current assets and liabilities) — Financial Accounting Standards Board
- IAS 1, Presentation of Financial Statements — IFRS Foundation
- Principles of Corporate Finance (Brealey, Myers and Allen) — McGraw-Hill
About this calculator
- Built and reviewed by the Calculation Machine team · How we build and test calculators
- Last reviewed: October 24, 2026
- Report an error