How to use this calculator
Take the first two figures from the same balance sheet date.
- Current assets: cash plus anything expected to turn into cash within a year, such as money customers owe you (accounts receivable) and inventory.
- Current liabilities: bills due within a year, such as supplier invoices (accounts payable), wages owed, tax due and the part of any loan that falls due in the next twelve months.
- Yearly revenue: total sales for a full year.
The calculator returns working capital in dollars, the current ratio, working capital as a percent of revenue and a plain reading of what the ratio suggests.
Worked example
These are the starting values in the calculator above and the results they give. Change any input to see your own numbers.
- Current assets
- $250,000
- Current liabilities
- $150,000
- Yearly revenue
- $1,200,000
- Working capital
- $100,000
- Current ratio
- 1.67
- Share of revenue
- 8.3%
- Reading
- Healthy
How working capital is calculated
Working capital is current assets minus current liabilities. With $120,000 of current assets and $80,000 of current liabilities, working capital is $40,000. A positive figure means short-term assets exceed short-term debts.
The current ratio is current assets divided by current liabilities. In the same example, $120,000 ÷ $80,000 is 1.5, so the business holds $1.50 of current assets for every $1 it owes in the short term.
Working capital as a percent of revenue divides working capital by yearly revenue. It shows how much money is tied up in day-to-day operations for each dollar of sales, which makes it easier to compare businesses of different sizes.
Working capital = CA − CL; Current ratio = CA ÷ CL- CA
- current assets
- CL
- current liabilities
- Working capital ÷ yearly revenue × 100
- working capital as a percent of revenue
How to read the results
The health reading is based on the current ratio. The bands are rough rules of thumb that vary by industry and lender.
| Current ratio | Reading |
|---|---|
| Below 1.0 | Tight. Short-term debts are larger than short-term assets. |
| About 1.2 to 2.0 | Healthy. There is a cushion without too much sitting idle. |
| Well above 2.0 | May mean idle cash or stock that could be put to better use. |
Read the number in context.
- A business that collects cash at the point of sale and pays suppliers later can run safely on a low ratio.
- A business with slow-paying customers or seasonal stock usually needs a bigger cushion.
- The ratio treats all current assets as equal. Inventory that is hard to sell is not as useful as cash.
- A balance sheet is a snapshot of one day. Check the figures at several points in the year.
For more background, read what working capital is. If borrowing is part of the plan, the business loan calculator shows what the repayments would add to your short-term bills.
Frequently asked questions
What is working capital?
Working capital is the difference between current assets and current liabilities. Current assets are cash and things that should become cash within a year, such as receivables and inventory. Current liabilities are debts due within a year. The result shows how much short-term money a business has left to run its daily operations after covering what it owes in the near future.
What is a good current ratio?
A common rule of thumb is that a current ratio between about 1.2 and 2.0 is healthy. Below 1.0 means short-term debts are larger than short-term assets. Well above 2.0 can point to cash or stock sitting idle. These bands are only a guide, because normal levels differ a lot between industries and between lenders.
Is negative working capital always bad?
Not always. Some businesses collect cash from customers right away and pay suppliers weeks later, so they can run with negative working capital without trouble. For most other businesses it is a warning sign that bills may come due faster than cash arrives. What matters is the timing of cash in and cash out, which a single balance sheet figure cannot fully show.
How can a business improve its working capital?
The main options are to collect from customers faster, hold less slow-moving inventory, agree longer payment terms with suppliers, or replace short-term debt with longer-term funding. Raising profit and keeping it in the business also helps over time. Each option has a cost. Pushing customers too hard or running stock too low can hurt sales.
What is the difference between working capital and cash flow?
Working capital is a snapshot. It compares short-term assets and debts on a single date. Cash flow is a movement. It measures the money coming in and going out over a period. A business can show positive working capital and still run short of cash if most of that capital is locked up in unpaid invoices or unsold stock.
This calculator gives estimates for education only. It does not know your full situation and is not financial advice. Reviewed and updated November 15, 2026.