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Cash & receivables

Working capital calculator — current assets minus liabilities

Calculate working capital from your current assets and liabilities. Get current ratio, quick ratio, working capital as a % of revenue and days of coverage.

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Short answer

Working capital is current assets minus current liabilities. With $4,890,000 of current assets and $2,400,000 of current liabilities, working capital is $2,490,000 and the current ratio is 2.04. Divide by average daily revenue to get days of coverage — here $2,490,000 against $65,753 a day is 37.9 days of revenue funded by the balance sheet.

Working capital is the money your balance sheet has locked into day-to-day trading: stock on the shelf, invoices waiting to be paid, minus whatever your suppliers and lenders are owed inside the year. It funds itself when the three legs are short and starves you when they stretch.

Enter the components rather than two totals. The calculator returns net working capital, the current and quick ratios, working capital as a share of revenue, and how many days of trading that investment represents.

Your numbers

Current assets
$

Include marketable securities. Exclude restricted or pledged cash.

$

Trade AR net of credit notes and bad-debt reserve.

$

Raw material, WIP and finished goods at carrying value.

$

Prepaid expenses, recoverable tax. Blank counts as zero.

Current liabilities
$

Trade payables. Exclude intercompany.

$

Overdrafts, revolver drawn, plus the current portion of long-term debt.

$

Accruals, payroll, tax and deferred revenue due within 12 months.

$

Used for working capital as a share of revenue and days of coverage.

Result

Net working capital
$2,490,000

$4,890,000 current assets less $2,400,000 current liabilities

Current ratio2.04
Quick ratio (cash + AR)0.98
Cash ratio0.20
Working capital as % of revenue10.4%
Days of revenue coverage37.9 days
Average daily revenue$65,753
Current assets = $480,000 + $1,860,000 + $2,340,000 + $210,000 = $4,890,000
Current liabilities = $1,420,000 + $600,000 + $380,000 = $2,400,000
Current ratio = $4,890,000 ÷ $2,400,000 = 2.04
Quick ratio = $2,340,000 ÷ $2,400,000 = 0.98
Working capital = $4,890,000 − $2,400,000 = $2,490,000
The current ratio of 2.04 looks comfortable, but the quick ratio is 0.98: inventory is 47.9% of current assets, so covering short-term obligations depends on selling stock. Check how fast it turns before calling this liquidity.
Where the working capital sits. A large inventory share is what separates the current ratio from the quick ratio.
ComponentAmountShare of its side
Cash and equivalents$480,0009.8%
Accounts receivable$1,860,00038.0%
Inventory$2,340,00047.9%
Other current assets$210,0004.3%
Accounts payable$1,420,00059.2%
Short-term debt$600,00025.0%
Other current liabilities$380,00015.8%

Everything is computed in your browser. Nothing you type is sent anywhere or stored.

The formula

Working capital = Current assets − Current liabilities
Current assets
Cash and equivalents, trade receivables, inventory, and other assets expected to convert within 12 months.
Current liabilities
Trade payables, short-term debt and the current portion of long-term debt, accruals, and other obligations due within 12 months.
Current ratio
Current assets ÷ current liabilities. A coverage multiple, not a cash figure.
Quick ratio
(Cash + receivables) ÷ current liabilities. Strips out inventory and prepaids, because neither pays a supplier next week.
Days of coverage
Working capital ÷ average daily revenue. Expresses the balance-sheet investment in days of trading.

Working capital is a scale measure, not a quality measure. A rising figure can mean growth or it can mean slow collections and dead stock — which is why this calculator splits the assets side into cash, receivables and inventory rather than accepting one total.

Worked example

Cash and equivalents
$480,000
Accounts receivable
$1,860,000
Inventory
$2,340,000
Other current assets
$210,000
Current liabilities
$2,400,000
Annual revenue
$24,000,000
Result
Working capital = $2,490,000 · current ratio 2.04 · quick ratio 0.98

Current assets total $4,890,000 against $2,400,000 of current liabilities, so working capital is $2,490,000 and the current ratio is 2.04. The quick ratio is only 0.98, because inventory is 47.9% of current assets — on paper this business has twice the cover it needs, but paying every short-term obligation on time still depends on shifting stock. Working capital is 10.4% of revenue, or 37.9 days of trading.

Reading the ratios together

One ratio in isolation misleads. Current ratio counts inventory as though it were cash; quick ratio assumes you can't sell any of it. Read them as a pair, because the gap between them tells you how much of your cover is stock.

PatternWhat it usually meansWhere to look
Current above 1.5, quick above 1.0Comfortable. Short-term obligations are covered without selling stock.Check whether the cover is expensive — see inventory turnover.
Current above 1.5, quick below 1.0Cover exists but sits in inventory.Slow-moving SKUs, over-ordering, safety stock set by feel.
Current 1.0 to 1.2Tight. A single late customer moves the number.Collections and the receivables ageing, then supplier terms.
Current below 1.0Short-term obligations exceed short-term assets.Debt maturity profile, revolver headroom, covenant tests.

Working capital as a percent of revenue

The absolute figure grows with the business, so the useful version is the ratio. At $24,000,000 of revenue, $2,490,000 of working capital is 10.4% — meaning every extra $1,000,000 of sales, at the same efficiency, will consume roughly $104,000 of cash before it produces any. That is the number to take into a growth plan, and the reason profitable companies run out of money.

What belongs in each side

  • Exclude non-trade items from receivables: intercompany balances, employee advances and tax refunds behave nothing like a customer invoice.
  • Include the current portion of long-term debt. Leaving it out is the most common way a current ratio gets flattered.
  • Treat undrawn revolvers as absent. Facilities are liquidity, not working capital, and covenants can withdraw them exactly when you need them.
  • Keep restricted cash out of the quick ratio. If it is pledged, it cannot pay a supplier.
  • Use the same date for every line. A month-end assets figure against a mid-month payables figure produces a ratio nobody can reconcile.

The three levers, in order of payback

Working capital is the sum of the cash conversion cycle's legs, so it moves when they do. Collections usually pays back fastest — see the DSO calculator. Inventory is the biggest pot in most distributors and manufacturers, and the slowest to drain. Supplier terms are free financing until you damage a relationship you depend on, which the DPO calculator will size before you try it.

Getting the inputs is the real work: a trial balance mapped to current versus non-current, on the same date, with intercompany stripped out and inventory split by site. With you ask for "current assets and current liabilities by subsidiary at month end, excluding intercompany" and read the query underneath the answer before you trust it.

Frequently asked questions

How do you calculate working capital?

Subtract current liabilities from current assets. Current assets are cash, receivables, inventory and other items converting inside 12 months; current liabilities are payables, accruals, short-term debt and the current portion of long-term debt. For example, $4,890,000 minus $2,400,000 gives $2,490,000 of net working capital.

What is a good working capital ratio?

For most distributors and manufacturers a current ratio between 1.5 and 2.5 is comfortable, with a quick ratio at or above 1.0. Much higher usually means cash and stock sitting idle rather than strength. The right level depends on how fast your inventory moves and how reliably your customers pay.

What is the difference between the current ratio and the quick ratio?

The current ratio divides all current assets by current liabilities. The quick ratio counts only cash and receivables, excluding inventory and prepaid expenses. When the two diverge sharply, most of your short-term cover is stock — fine for a business that turns inventory quickly, risky for one that does not.

Can working capital be negative?

Yes, and it is not automatically bad. Supermarkets and some subscription businesses collect from customers before paying suppliers, so current liabilities exceed current assets by design. Negative working capital is a problem when it comes from unpaid suppliers and maturing debt rather than from fast cash collection.

Is working capital the same as cash flow?

No. Working capital is a balance-sheet position at one date; cash flow is movement over a period. They connect through the change in working capital: an increase consumes cash even when profit is rising, which is why a growing, profitable business can still miss payroll.

How much working capital does growth need?

Multiply your working capital as a percent of revenue by the revenue increase. At 10.4%, adding $5,000,000 of sales at the same efficiency ties up about $520,000 of extra cash. Shortening the cash conversion cycle first is cheaper than funding the same inefficiency at a larger scale.

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