Working Capital
$9,992.00
Current Ratio
1250:1
How it works
The Working Capital Calculator computes a company's working capital (current assets − current liabilities), current ratio, quick ratio, and cash ratio — the primary measures of short-term liquidity and financial health used by lenders, investors, and analysts.
Working capital is the lifeblood of business operations. Positive working capital means the company can cover short-term obligations from short-term assets. Negative working capital signals potential insolvency risk, though some business models (negative-working-capital retailers like Amazon) intentionally operate with negative working capital.
How to use it: enter current assets (cash, accounts receivable, inventory, prepaid expenses, short-term investments) and current liabilities (accounts payable, short-term debt, accrued liabilities, deferred revenue). The calculator returns: - Working Capital = Current Assets − Current Liabilities - Current Ratio = Current Assets / Current Liabilities (healthy: above 1.5, warning: below 1.0) - Quick Ratio = (Current Assets − Inventory) / Current Liabilities (healthy: above 1.0) - Cash Ratio = Cash / Current Liabilities (most conservative liquidity measure)
Ratio interpretation: - Current ratio above 2.0: very conservative, may indicate underdeployed capital - Current ratio 1.5–2.0: healthy, typical for most industries - Current ratio 1.0–1.5: adequate, monitor closely - Current ratio below 1.0: negative working capital territory, high risk
Industry context: certain industries (utilities, grocery, airlines) routinely operate with low current ratios because their cash cycle is predictable. Context matters more than absolute thresholds.
Privacy: financial data runs in the browser.
Frequently Asked Questions
- Yes — this is the cash flow vs. profit distinction. A profitable business with poor working capital management can fail if it can't pay its short-term obligations. A business that generates $1M in annual profit but has $2M in payables due this month and only $100K in cash is technically insolvent in the short term, even if its long-term economics are sound.
- Negative working capital (current liabilities > current assets) is dangerous for most businesses. However, certain models intentionally operate negative working capital: Amazon collects payment immediately from customers but pays suppliers net-30/60 — the float is free financing. Grocery stores, fast food chains, and subscription businesses with upfront payments can sustainably operate negative working capital if their cash flow is predictable.
- Quick ratio = (Cash + Short-term investments + Accounts receivable) / Current liabilities. It excludes inventory (which may take time to sell) and prepaid expenses. The quick ratio is more conservative and more relevant for businesses with slow-moving or perishable inventory. A manufacturer with $500K in slow-moving inventory and a current ratio of 2.0 might have a quick ratio of only 0.8 — indicating potential liquidity issues.
- Accelerate receivables: shorten payment terms, offer early payment discounts, use invoice factoring. Delay payables: negotiate longer terms with suppliers, use 0% financing options. Reduce inventory: implement just-in-time ordering, identify and liquidate slow-moving stock. Increase current assets: short-term line of credit, sell non-core assets. Each improvement shows immediate impact in the calculator.