Working capital measures whether a business can cover short-term obligations with short-term assets. It is a core liquidity health check for owners, lenders, and operators.
How to use this calculator
- Enter total current assets (cash, receivables, inventory due within a year).
- Enter total current liabilities (payables, short-term debt, accrued expenses).
- Review working capital dollars and the current ratio.
- Read the liquidity assessment and operational recommendations.
Formula
Working capital = Current assets − Current liabilities. Current ratio = Current assets ÷ Current liabilities. A ratio below 1.0 means liabilities exceed assets.
Example
With $150,000 in current assets and $75,000 in current liabilities, working capital is $75,000 and the current ratio is 2.0 — generally healthy liquidity.
Frequently asked questions
What counts as a current asset?
Cash, accounts receivable, inventory, and other assets expected to convert to cash within 12 months.
What is a healthy current ratio?
Many businesses target 1.5–2.5. Below 1.0 signals liquidity stress; above 3.0 may indicate underused cash or excess inventory.
Can working capital be negative?
Yes. Negative working capital means current liabilities exceed current assets — common in some retail models but risky without reliable cash flow.
How is this different from cash runway?
Working capital is a balance-sheet snapshot. Cash runway projects how long cash lasts at a burn rate. Use both for a fuller picture.