Working Capital Calculator
✦ Finance & MoneyThis working capital calculator finds net working capital, current assets minus current liabilities, from five balance-sheet figures. It doubles as a current ratio calculator and quick ratio calculator, adds the cash ratio and operating working capital, and gives the change in working capital since a prior period.
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The formula
Net working capital and the liquidity ratios
Net working capital = Current assets − Current liabilities | Current ratio = Current assets ÷ Current liabilities | Quick ratio = (Cash + short-term securities + Receivables) ÷ Current liabilities | Cash ratio = (Cash + short-term securities) ÷ Current liabilities | Operating working capital = (Current assets − Cash) − (Current liabilities − Short-term debt)“Current” means expected to be realised or settled within 12 months or the operating cycle, if longer (FASB ASC 210-10-45). All balances are at the same balance-sheet date. The quick ratio’s numerator is cash, securities and receivables by default; Advanced switches to current assets minus inventory, and the result names the formula used. Ratios are shown to two decimals, computed unrounded; a ratio with zero current liabilities is reported in words. No benchmark ratio is shown.
Calculating it by hand
- Enter cash and short-term securities (money-market funds, Treasury bills).
- Enter accounts receivable, net of any allowance for doubtful accounts.
- Enter inventory and other current assets such as prepaid expenses.
- Enter total current liabilities: payables, accrued expenses, short-term debt and the current portion of long-term debt.
- In Advanced, choose the quick-ratio formula, enter the short-term debt inside current liabilities for operating working capital, or turn on a prior period for the change in working capital.
- Read net working capital and the three ratios, then the chart of current assets against current liabilities.
Worked examples
A balance-sheet snapshot (the defaults)
Current assets: $50,000 + $80,000 + $120,000 + $10,000 = $260,000; current liabilities $150,000.Net working capital = $260,000 − $150,000 = $110,000.Current ratio = 1.73; quick ratio = $130,000 ÷ $150,000 = 0.87; cash ratio = 0.33.Operating working capital (Advanced: short-term debt $30,000) = $210,000 − $120,000 = $90,000.
Net working capital $110,000; current 1.73, quick 0.87, cash 0.33.
The two quick-ratio formulas on the same figures (Advanced: quick-ratio formula)
Cash, securities and receivables: $50,000 + $80,000 = $130,000 → $130,000 ÷ $150,000 = 0.87.Current assets minus inventory: $260,000 − $120,000 = $140,000 → $140,000 ÷ $150,000 = 0.93.The $10,000 of prepaid expenses is the whole difference.
Quick ratio 0.87 or 0.93, depending on the formula named.
A working capital deficit
Cash $30,000, receivables $20,000, inventory $30,000, other current assets $0: current assets $80,000.Current liabilities $120,000.Net working capital = $80,000 − $120,000 = −$40,000, a deficit.Current ratio 0.67; quick ratio $50,000 ÷ $120,000 = 0.42; cash ratio 0.25.
A $40,000 working capital deficit; current ratio 0.67.
Methodology
How working capital and the liquidity ratios are read
Net working capital is a dollar buffer; the three ratios ask how much of that buffer is really liquid. They are read together, at one balance-sheet date, and against your own history rather than a typed benchmark.
Read sources and limitsWhat is net working capital?
Net working capital is a business’s current assets minus its current liabilities: the cash, receivables and inventory it expects to turn into cash within a year, less what it must pay within a year. Because that dollar figure hides how liquid the assets are, a working capital calculator adds the current, quick and cash ratios.
Current assets and liabilities are defined by FASB ASC 210-10-45: assets expected to be realised in cash, sold or consumed, and obligations expected to be settled, within 12 months or the normal operating cycle if that is longer.
How do you calculate working capital?
Add the current assets and subtract the current liabilities. With the defaults, cash $50,000 + receivables $80,000 + inventory $120,000 + other current assets $10,000 = $260,000 of current assets; less $150,000 of current liabilities leaves net working capital of $110,000.
A negative result is a working capital deficit: current liabilities exceed current assets. It is reported as a deficit, not judged. For a retailer paid in cash at the till and paying suppliers on 30-day terms it can be the normal shape of the business; for a manufacturer waiting on receivables it means near-term obligations depend on future collections or credit.
What are the current, quick and cash ratios?
The current ratio divides current assets by current liabilities: $260,000 ÷ $150,000 = 1.73. It treats inventory, which may take months to sell, the same as cash. The quick ratio keeps only the assets that turn into cash quickly: cash, securities and receivables, ($50,000 + $80,000) ÷ $150,000 = 0.87.
The cash ratio keeps only cash and securities: $50,000 ÷ $150,000 = 0.33, a stress test rather than a target.
Two quick-ratio formulas are in common use. The one used by default leaves out inventory and prepaid expenses, because prepaids are consumed rather than turned into cash. The other is current assets minus inventory, which keeps prepaids in: ($260,000 − $120,000) ÷ $150,000 = 0.93. FASB does not define the ratio, so the calculator names the formula beside the result and lets you switch.
What is operating working capital?
Operating (non-cash) working capital leaves out the financing items on both sides: (current assets − cash and securities) − (current liabilities − short-term debt and the current portion of long-term debt). It measures what the operating cycle ties up in receivables and inventory, net of what suppliers and accruals fund.
With $30,000 of short-term debt inside the $150,000 of current liabilities, operating working capital is $210,000 − $120,000 = $90,000.
How do you calculate the change in working capital?
Subtract the prior period’s net working capital from the current one. With the default prior balance sheet, $240,000 of current assets ($40,000 + $70,000 + $110,000 + $20,000) less $160,000 of liabilities gave $80,000, so working capital rose $30,000 to today’s $110,000.
In a statement of cash flows by the indirect method (FASB ASC 230), or a discounted cash flow model, an increase like that is a use of cash and a decrease is a source.
The cash flow calculator on this site takes the same changes in receivables, inventory and payables in its operating cash flow readout, and the cash conversion cycle calculator turns the same balances into days.
What doesn't this working capital calculator do?
It does not classify your balance sheet for you, test whether receivables are collectable or inventory saleable, or say what ratio is right for your business: published benchmarks depend on industry and business model, so none is typed here. Compare your own periods instead. It is an estimate from the figures you enter, not accounting or financial advice.
Working Capital questions
How do you calculate net working capital?
Current assets minus current liabilities. $260,000 of current assets less $150,000 of current liabilities is $110,000 of net working capital. Use balances from the same balance-sheet date.
What is the working capital formula?
Working capital = current assets − current liabilities. Current assets are cash, short-term securities, receivables, inventory and prepaid expenses; current liabilities are payables, accrued expenses, short-term debt and the current portion of long-term debt, all due or used within 12 months or the operating cycle.
How do you calculate the current ratio?
Divide current assets by current liabilities: $260,000 ÷ $150,000 = 1.73. Above 1 means net working capital is positive; below 1 means a deficit.
What is the quick ratio formula?
(Cash + short-term securities + receivables) ÷ current liabilities: ($50,000 + $80,000) ÷ $150,000 = 0.87. Some sources use (current assets − inventory) ÷ current liabilities instead, 0.93 here, because it keeps prepaid expenses in; the calculator offers both and names the one used.
Why is inventory left out of the quick ratio?
Because it has to be sold, and often collected, before it becomes cash, which can take months and may happen below cost. Prepaid expenses are left out of the default formula as well, because they are used up rather than turned into cash.
What does negative working capital mean?
Current liabilities exceed current assets: with $80,000 of current assets and $120,000 of current liabilities the deficit is $40,000. Whether that is a problem depends on the business: a retailer paid in cash at the till can run a deficit by design, while a business waiting on receivables relies on future collections or credit.
How do I calculate the change in working capital?
Current net working capital minus the prior period’s. $110,000 now against $80,000 a year ago is an increase of $30,000, which in a cash flow statement is a use of cash. Turn on the prior period in Advanced to calculate it.
What is the cash ratio?
(Cash + short-term securities) ÷ current liabilities: $50,000 ÷ $150,000 = 0.33. It asks whether cash alone could pay every current liability today, so a figure below 1 is common; it is used as a stress test.
What is the difference between working capital and operating working capital?
Operating working capital leaves out cash and interest-bearing short-term debt: ($260,000 − $50,000) − ($150,000 − $30,000) = $90,000. It shows what the operating cycle ties up, separate from how the business is financed.
Source notes
Method, sources & limitations
Every figure on this page comes from the formula above applied to the values you enter. Nothing is estimated from market data, and no result is a forecast. These are the sources behind the method and any fixed figures it uses:
- FASB ASC 210-10-45 — Balance Sheet: classification of current assets and current liabilities
- FASB ASC 230 — Statement of Cash Flows (changes in operating assets and liabilities, indirect method)
- U.S. Securities and Exchange Commission — Beginners’ Guide to Financial Statements (working capital and the balance sheet)
Educational information only. Results are estimates produced from the assumptions you enter, and are not financial, tax, legal or medical advice. Check anything that matters against a qualified professional and the cited sources.