Working Capital Calculator
Calculate working capital and the current ratio from current assets and current liabilities, with a health-band interpretation of liquidity.
$
$
Working Capital
$100,000
Current Ratio
1.67
How Working Capital Is Calculated
Working capital measures a business's short-term financial health — its ability to cover day-to-day obligations. Enter current assets (cash, receivables, inventory) and current liabilities (payables, short-term debt) to see the working capital amount and the current ratio.
Current Ratio = Current Assets ÷ Current Liabilities
Example
A company with $250,000 in current assets and $150,000 in current liabilities has working capital of $100,000 and a current ratio of 1.67 — comfortably in the healthy range, meaning it has $1.67 in short-term assets for every $1 of short-term debt.
Common Use Cases
- Assessing whether a business can meet its short-term obligations.
- Comparing liquidity across competitors or over time.
- Supporting loan applications and investor due diligence.
- Spotting early warning signs of cash-flow trouble.
FAQs
What counts as a current asset or current liability?
Current assets are cash and items expected to convert to cash within a year — cash, accounts receivable, and inventory. Current liabilities are obligations due within a year, such as accounts payable, short-term loans, and accrued expenses.
Is negative working capital always bad?
Usually it signals liquidity risk, but some business models (high-volume retailers with fast inventory turnover) operate with negative working capital by design. Context and industry norms matter.
What is considered a good current ratio?
A ratio between 1.5 and 2.0 is generally considered healthy for most industries. Below 1.0 suggests potential trouble covering short-term debts, while a very high ratio can indicate underused assets.