💼 Working Capital Calculator
Calculate business liquidity and operational efficiency
How to Use This Calculator
Enter Current Assets
Input the total current assets - assets that can be converted to cash within one year (cash, accounts receivable, inventory, etc.) from your balance sheet.
Enter Current Liabilities
Enter the total current liabilities - obligations due within one year (accounts payable, short-term debt, accrued expenses, etc.) from your balance sheet.
Review Working Capital
See the calculated working capital - current assets minus current liabilities. Positive working capital indicates good liquidity, while negative working capital may indicate liquidity issues.
Formula
Working Capital = Current Assets - Current Liabilities
Example Calculation:
If current assets $500,000, current liabilities $300,000:
• Working capital = $500,000 - $300,000 = $200,000
• This indicates positive working capital and good liquidity
About Working Capital Calculator
A working capital calculator helps you calculate working capital, which represents the difference between a company's current assets and current liabilities. Working Capital = Current Assets - Current Liabilities. Working capital is a measure of short-term financial health and operational efficiency. Positive working capital indicates the company has sufficient liquid assets to cover short-term obligations, while negative working capital may indicate liquidity issues. Working capital is essential for day-to-day operations, covering expenses like payroll, inventory, and short-term debts. Understanding working capital helps assess liquidity, financial health, and operational efficiency.
When to Use This Calculator
- Liquidity Analysis: Assess short-term financial health and liquidity
- Financial Planning: Plan working capital requirements
- Performance Evaluation: Evaluate operational efficiency
- Risk Assessment: Assess liquidity risk
Understanding Working Capital
- Positive Working Capital: Good liquidity (can cover short-term obligations)
- Negative Working Capital: May indicate liquidity issues (concerning)
- Current Assets: Assets convertible to cash within one year
- Current Liabilities: Obligations due within one year
Why Use Our Calculator?
- ✅ Liquidity Analysis: Calculate working capital accurately
- ✅ Financial Planning: Plan working capital requirements
- ✅ Performance Evaluation: Evaluate operational efficiency
- ✅ Risk Assessment: Assess liquidity risk
- ✅ 100% Free: No registration or payment required
Frequently Asked Questions
What is working capital?
Working capital represents the difference between a company's current assets and current liabilities. Working Capital = Current Assets - Current Liabilities. Working capital is a measure of short-term financial health and operational efficiency. Positive working capital indicates the company has sufficient liquid assets to cover short-term obligations, while negative working capital may indicate liquidity issues. Working capital is essential for day-to-day operations, covering expenses like payroll, inventory, and short-term debts. Understanding working capital helps assess liquidity, financial health, and operational efficiency.
What's a good working capital?
A good working capital depends on the industry and business model. Generally, positive working capital is good, indicating the company can cover short-term obligations. However, the optimal amount varies: (1) Service businesses - may need less working capital, (2) Retail/manufacturing - typically need more working capital for inventory, (3) Growth companies - may need more working capital for expansion, (4) Mature companies - may optimize working capital. Too much working capital may indicate inefficient use of assets, while too little may indicate liquidity risk. The key is finding the right balance for your business.
Can working capital be negative?
Yes, working capital can be negative, which means current liabilities exceed current assets. Negative working capital may indicate: (1) Liquidity issues - insufficient liquid assets to cover short-term obligations, (2) Operational problems - problems with cash flow or operations, (3) Growth phase - heavy investment in operations during growth, (4) Business model - some businesses (like retail) can operate with negative working capital due to fast inventory turnover. Negative working capital is concerning and may require immediate attention, though it can be acceptable in certain situations if managed properly.
How do I improve working capital?
To improve working capital: (1) Increase current assets - improve cash collection, optimize inventory, (2) Decrease current liabilities - extend payment terms, reduce short-term debt, (3) Manage receivables - improve collection and reduce DSO, (4) Optimize inventory - reduce inventory levels, improve turnover, (5) Negotiate terms - negotiate better payment terms with suppliers, (6) Cash management - improve cash flow and cash management. Improving working capital increases liquidity and financial health. Focus on both increasing assets and managing liabilities effectively.