Working Capital Calculator
Working capital is the foundation of short-term financial health. A business with positive working capital can cover its near-term obligations using assets it expects to convert to cash within 12 months. The current ratio and quick ratio derived from working capital are among the most widely used liquidity metrics in financial analysis and credit underwriting. This calculator takes current assets broken into cash, receivables, and inventory, and total current liabilities to compute net working capital, current ratio, and quick ratio, giving a complete short-term liquidity picture from a balance sheet snapshot.
Working capital formula
Total Current Assets = Cash + Receivables + Inventory + Other Current Assets
Net Working Capital = Current Assets - Current Liabilities
Current Ratio = Current Assets / Current Liabilities
Quick Ratio = (Cash + Receivables) / Current Liabilities
Liquidity ratio benchmarks
- Current ratio below 1.0: potential short-term liquidity risk.
- Current ratio 1.5 to 3.0: healthy range for most industries.
- Quick ratio above 1.0: strong short-term liquidity without relying on inventory.
- Quick ratio below 0.5: may indicate difficulty meeting obligations without selling inventory.
Working capital: frequently asked questions
What is working capital?
Working capital is the difference between a company's current assets and current liabilities. It measures the company's short-term liquidity and its ability to meet near-term financial obligations without needing external financing.
What is a good current ratio?
A current ratio between 1.5 and 3.0 is generally considered healthy. Below 1.0 means current liabilities exceed current assets, which is a warning sign for short-term liquidity. Above 3.0 may indicate the company is holding excess idle cash or inventory.
What is the difference between current ratio and quick ratio?
The current ratio includes all current assets including inventory. The quick ratio (acid test) excludes inventory because inventory may not be quickly convertible to cash. A quick ratio above 1.0 is generally considered strong.
What is negative working capital?
Negative working capital (current liabilities exceeding current assets) can indicate liquidity risk for most businesses. However, some high-velocity retail and subscription businesses (like Amazon, Netflix) operate with negative working capital as a deliberate cash advantage, collecting from customers before paying suppliers.
How do I improve working capital?
Improve working capital by: collecting receivables faster (reduce DSO), negotiating longer payment terms with suppliers (increase DPO), reducing excess inventory, or drawing on revolving credit facilities to smooth seasonal fluctuations.
Sources
- SEC: SEC 10-K Filings (Balance Sheet Data).
- Federal Reserve: Financial Accounts of the United States.
Reviewed by the CalculatorHub team, edited by James Graham, 14 June 2026. See our methodology.