Working Capital Calculator
Enter your current assets and current liabilities to see working capital, current ratio and quick ratio — with a live liquidity health check.
Working capital breakdown
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Disclaimer: Indicative liquidity estimate based on figures you enter. Ideal ratios vary by industry and business model. Consult a professional before financing or credit decisions.
The working capital formulas
Working capital measures the short-term liquidity of a business — whether it can pay off obligations due within a year using assets that convert to cash within a year. The current and quick ratios express the same idea as a multiple.
Worked example
A trading business has ₹5,00,000 inventory, ₹3,00,000 receivables and ₹2,00,000 cash — total current assets of ₹10,00,000. Its payables are ₹4,00,000 and short-term loans ₹1,00,000 — total current liabilities of ₹5,00,000.
| Inventory / stock | ₹5,00,000 |
| Accounts receivable | ₹3,00,000 |
| Cash & bank | ₹2,00,000 |
| Total current assets (CA) | ₹10,00,000 |
| Accounts payable | ₹4,00,000 |
| Short-term loans | ₹1,00,000 |
| Total current liabilities (CL) | ₹5,00,000 |
| Working capital = CA − CL | ₹5,00,000 |
| Current ratio = CA ÷ CL | 2.00 |
| Quick ratio = (CA − Inventory) ÷ CL | 1.00 |
Key terms explained
Working capital
The difference between current assets and current liabilities. It is the day-to-day operating liquidity a business has to fund purchases, wages and short-term dues. Positive is generally good; persistently negative can mean trouble.
Current ratio
Current assets divided by current liabilities. An ideal range is 1.5 to 2.0. Under 1 signals a liquidity crunch; far above 2 can mean cash, stock or receivables are sitting idle instead of earning returns.
Quick / acid-test ratio
A stricter test that excludes inventory (the hardest current asset to convert to cash quickly). A quick ratio of 1.0+ means the business can pay all short-term dues without relying on selling stock.
Working capital cycle
The time it takes to turn cash into inventory, inventory into sales, and receivables back into cash. A shorter cycle frees up cash; collecting faster and paying suppliers on terms improves it.
Negative working capital
When current liabilities exceed current assets. It is a warning sign for most firms, though some cash-rich retailers run it deliberately because customers pay upfront while suppliers are paid later.
What is working capital?
Current assets minus current liabilities — the money tied up in running the business day to day. Positive working capital means current assets cover short-term obligations; negative usually signals a liquidity problem.
What is the current ratio and what is a good level?
Current assets divided by current liabilities. Around 1.5 to 2 is generally comfortable for a trading or manufacturing business. Much above that can indicate idle cash or slow-moving inventory rather than strength.
How is the quick ratio different?
It excludes inventory from current assets, on the view that stock cannot always be converted to cash quickly. A quick ratio near 1 means you can meet short-term dues without selling inventory.
What is the working capital cycle?
Days inventory outstanding plus days sales outstanding minus days payables outstanding. It is the number of days your cash is locked up, and shortening it releases cash without borrowing.
How can I reduce my working capital requirement?
Collect receivables faster, hold less inventory, negotiate longer supplier credit, and invoice promptly. Each day removed from the cycle frees cash permanently, which is usually cheaper than a working capital limit.
Disclaimer: This tool gives indicative results for general guidance only and is not professional advice. Please verify with a qualified CA before acting on the numbers.