Working Capital Calculator
Calculate working capital and the working-capital ratio from current assets and current liabilities — the short-term cash cushion that funds operations.
How it works
Working capital = current assets − current liabilities · Working-capital ratio = current assets ÷ current liabilities
Working capital is the cash cushion that keeps day-to-day operations running: current assets minus current liabilities. Positive working capital means a business has more short-term resources than short-term obligations, so it can pay suppliers, meet payroll and absorb timing gaps without scrambling for financing. Negative working capital means near-term bills exceed near-term assets, which can signal a liquidity squeeze — though some businesses that collect from customers before paying suppliers (certain retailers and subscriptions) run on negative working capital by design. The working-capital ratio expresses the same relationship as current assets divided by current liabilities, identical to the current ratio, giving a scale-free view alongside the dollar figure.
Worked example
A business with $150,000 of current assets and $100,000 of current liabilities has working capital of 150,000 − 100,000 = $50,000, and a working-capital ratio of 150,000 ÷ 100,000 = 1.50. It has $50,000 of short-term resources free after covering everything due within the year.
Frequently asked questions
What does negative working capital mean?
It means current liabilities exceed current assets — the business owes more in the short term than it can readily cover. That often warns of a liquidity problem, but not always: some businesses collect cash from customers before they have to pay suppliers, so they operate on negative working capital by design. Context matters.
How is working capital different from the current ratio?
Working capital is a dollar figure (assets minus liabilities); the current ratio and working-capital ratio express the same relationship as a division (assets ÷ liabilities). The dollar amount shows the size of the cushion; the ratio shows its scale relative to obligations. Reading both is more informative than either alone.
How can a business improve its working capital?
Collect receivables faster, manage inventory so less cash is tied up in stock, negotiate longer payment terms with suppliers, and avoid funding long-term assets with short-term debt. Each frees up short-term resources or reduces short-term obligations, widening the working-capital cushion.
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Educational estimate, not financial advice.