Accounting Working Capital Calculator
Calculate working capital, current assets, current liabilities and liquidity ratios from your short-term business balances.
Overview
This Accounting Working Capital Calculator estimates the short-term funds available to your business by comparing cash, receivables, inventory and other current assets with bills, debt and other current liabilities.
How it works
Net working capital equals total current assets minus total current liabilities. A positive result means recorded short-term assets exceed recorded short-term obligations, while a negative result means obligations are higher. The current ratio divides all current assets by current liabilities. The quick ratio is a more conservative measure because it uses only cash and accounts receivable, excluding inventory and other current assets.
How to use this calculator
- 1Enter your cash and cash-equivalent balance.
- 2Add accounts receivable, inventory and other current assets.
- 3Enter accounts payable, short-term debt and accrued expenses.
- 4Include any remaining current liabilities.
- 5Review your net working capital and liquidity ratios.
Example Calculation
Cash and cash equivalents
$25,000
Accounts receivable
$40,000
Inventory
$30,000
Other current assets
$5,000
Accounts payable
$28,000
Short-term debt
$15,000
Accrued expenses
$7,000
Other current liabilities
$3,000
Net working capital
$47,000
With current assets of $100,000 and current liabilities of $53,000, estimated net working capital is $47,000. The current ratio is about 1.89x and the quick ratio is about 1.23x.
Frequently asked questions
What is working capital?
Working capital, often called net working capital, is the difference between current assets and current liabilities. It is a snapshot of short-term operating liquidity.
How is net working capital calculated?
Add cash, receivables, inventory and other current assets, then subtract accounts payable, short-term debt, accrued expenses and other current liabilities.
What does a positive working capital figure mean?
It means recorded current assets are greater than recorded current liabilities. It can indicate a short-term asset surplus, but payment timing and asset quality still matter.
What is a current ratio?
The current ratio is total current assets divided by total current liabilities. It is commonly used to compare available short-term resources with obligations due within a year.
What is the difference between the current ratio and quick ratio?
The current ratio includes all current assets. The quick ratio focuses on cash and accounts receivable, so it excludes inventory and is generally a stricter liquidity measure.
Should inventory be included in working capital?
Inventory is usually included as a current asset when it is expected to be sold or used within a year. Its usefulness for meeting obligations may depend on how quickly it can be sold.
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Assumptions and warnings
Assumptions
- All balances are measured on the same accounting date and in the same currency.
- Current assets and current liabilities are generally amounts expected to be realized, used or settled within one year.
- Inventory, receivables and other asset balances are used at their recorded values without adjustment for collectability or saleability.
- Results are accounting estimates and do not assess the timing of individual cash inflows and payments.
Warnings
- This calculator provides an estimate only and is not financial or accounting advice.
- A positive working capital balance does not by itself guarantee that a business can meet every payment when due.