Net Working Capital Calculator
Find net working capital and the current ratio from current assets and current liabilities — the cash cushion behind day-to-day operations.
How it works
Net working capital = current assets − current liabilities · Current ratio = current assets ÷ current liabilities
Net working capital is the dollar cushion between what a company owns that will turn to cash within a year and what it owes within that same year. Positive working capital means short-term assets more than cover short-term bills; a negative figure warns that the company may need fresh financing to meet near-term obligations. The current ratio expresses the same relationship as a multiple, making it easy to compare firms of different sizes.
Worked example
A business holds $500,000 in current assets and owes $300,000 in current liabilities. Net working capital is 500,000 − 300,000 = $200,000, and the current ratio is 500,000 ÷ 300,000 = 1.67×.
Frequently asked questions
Is more net working capital always better?
Not necessarily. A comfortable cushion reduces liquidity risk, but too much can mean cash, inventory or receivables are sitting idle instead of earning a return. The right level depends on the industry and cash-conversion cycle.
What does negative working capital mean?
Current liabilities exceed current assets. For most firms that signals liquidity strain, but some efficient retailers run negative working capital by design — customers pay before suppliers are due.
How does net working capital relate to the current ratio?
They describe the same thing differently: net working capital is the dollar difference between current assets and liabilities, while the current ratio is their quotient. A current ratio above 1 always means positive working capital.
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Educational estimate, not investment advice.