Working Capital Calculator
Calculate your business's working capital position, analyze liquidity ratios, and understand how much working capital you need for healthy operations.
Balance Sheet Items
Cash, receivables, inventory
Payables, short-term debt
Operating Cycle
Working Capital Analysis
Ratio Benchmarks
Understanding Working Capital
What is Working Capital?
Working capital is the difference between current assets and current liabilities. It measures your business's short-term liquidity and operational efficiency.
Cash Conversion Cycle
The CCC shows how long it takes to convert inventory investments into cash from sales. A shorter cycle means more efficient operations.
Current Ratio
Assets ÷ Liabilities. Measures ability to pay short-term obligations. 1.5-2.0x is considered healthy for most industries.
Quick Ratio
(Assets - Inventory) ÷ Liabilities. More conservative measure excluding inventory. 1.0x+ is typically healthy.
Days Outstanding
DIO, DSO, and DPO measure how quickly you sell inventory, collect receivables, and pay suppliers.
Frequently Asked Questions
How much working capital does my business need?
Most businesses should maintain 2-3 months of operating expenses in working capital. High-growth or seasonal businesses may need more. The right amount depends on your cash conversion cycle and industry.
What if my working capital is negative?
Negative working capital means current liabilities exceed current assets. While this can be normal for some business models (like subscription businesses with deferred revenue), it often indicates cash flow stress and difficulty meeting short-term obligations.
How can I improve my working capital?
Key strategies include: collecting receivables faster, negotiating longer payment terms with suppliers, reducing excess inventory, increasing sales profitability, or securing a working capital loan or line of credit.