Working Capital Calculator
Turn a balance sheet into a full short-term liquidity read. Enter current assets and current liabilities for net working capital and the current ratio, then optionally break out cash, receivables, inventory and payables for the quick ratio, or add revenue and a second period for working capital turnover, days working capital, and the change in working capital.
Formula
Worked example
With 65,377 in current assets and 34,159 in current liabilities: net working capital = 65,377 - 34,159 = 31,218, and the current ratio = 65,377 / 34,159 = 1.91, a healthy level of short-term liquidity. If inventory is 25,377, the quick ratio = (65,377 - 25,377) / 34,159 = 1.17. On 480,000 of revenue with average working capital near 27,109, turnover is about 17.7 times, or roughly 21 days of working capital.
What working capital tells you
Net working capital is the difference between everything a business expects to turn into cash within a year (current assets) and everything it must pay within a year (current liabilities). A positive number means the company can cover its near-term bills with its near-term resources and still have a cushion left over. A negative number means short-term obligations outweigh short-term assets, which can point to a looming cash crunch unless the business has reliable financing or fast-converting inventory. Because it is drawn straight from the balance sheet, it is one of the quickest reads on financial health.
Reading the current ratio and quick ratio
The current ratio divides current assets by current liabilities, expressing the same relationship as a multiple instead of a dollar amount. A ratio of 1.0 means assets exactly match liabilities; below 1.0 the company may struggle to meet obligations as they come due. Most analysts read a ratio between roughly 1.5 and 3.0 as healthy. A very high ratio, above 3.0, is not automatically good, since it can mean cash, receivables, or inventory are sitting idle rather than being reinvested. The quick ratio, or acid-test, is stricter: it removes inventory from current assets because inventory can be slow or hard to sell, so a quick ratio at or above 1.0 means the business could cover its current liabilities even if it sold no stock at all. Switch the detail level to "Break out components" to enter cash, receivables, and inventory separately and see the quick ratio.
Working capital turnover, days, and change over time
Working capital is best judged over time, not from a single snapshot. Turn on the two-period mode to add revenue and a prior balance sheet. Working capital turnover divides annual revenue by average working capital (this period plus the prior period, divided by two); a higher figure means the business generates more sales from each dollar tied up in short-term operations, though an unusually high number can hint that working capital is stretched thin. Days working capital, calculated as 365 divided by turnover, expresses the same idea as the number of days of sales locked up in working capital. The change in working capital against the prior period feeds directly into cash flow analysis: a rising working capital balance consumes cash, while a falling one releases it.
Where the numbers come from
Both core inputs sit near the top of the balance sheet. Current assets typically include cash and cash equivalents, marketable securities, accounts receivable, and inventory. Current liabilities typically include accounts payable, accrued expenses, short-term debt, and the current portion of long-term debt. Use the totals reported for the same date so the snapshot is consistent, and pull revenue from the income statement covering the matching period. Because these balances change as a business collects from customers, pays suppliers, and sells inventory, working capital is best tracked across several periods rather than judged from one quarter.
Liquidity ratio reference bands
| Ratio | Reading | Signal |
|---|---|---|
| Current ratio below 1.0 | Liabilities exceed assets | Risk |
| Current ratio 1.0 to 1.5 | Thin margin of cover | Caution |
| Current ratio 1.5 to 3.0 | Comfortable cushion | Healthy |
| Current ratio above 3.0 | Possibly idle assets | Caution |
| Quick ratio below 1.0 | Relies on selling inventory | Caution |
| Quick ratio 1.0 or higher | Covers bills without inventory | Healthy |
General guidance; healthy levels vary by industry, so compare against sector peers.
Frequently asked questions
What is the working capital formula?
Net working capital equals current assets minus current liabilities. If a business has 65,377 in current assets and 34,159 in current liabilities, its working capital is 31,218.
What is a good current ratio?
Most analysts consider a current ratio between roughly 1.5 and 3.0 healthy. Below 1.0 can signal trouble meeting short-term obligations, while well above 3.0 may mean assets are sitting idle. The ideal level varies by industry.
How is the quick ratio different from the current ratio?
The quick ratio, or acid-test, removes inventory from current assets before dividing by current liabilities, because inventory can be slow to convert to cash. It is a stricter liquidity test: a quick ratio at or above 1.0 means a business could cover its current liabilities without selling any stock. Use the components mode to calculate it here.
What is working capital turnover?
Working capital turnover divides annual revenue by average working capital across two periods. It shows how much revenue each dollar of working capital supports. A higher ratio generally means efficient use of short-term capital, though an unusually high figure can signal that working capital is stretched too thin to fund growth.
Can working capital be negative?
Yes. Negative working capital means current liabilities exceed current assets. It can signal a cash squeeze, though some businesses with fast inventory turnover and supplier credit operate with negative working capital by design.