Working Capital Calculation

Measure your business's short-term financial health and operational efficiency. Enter your current assets and liabilities below to calculate your net working capital and current ratio.

Current Assets

Current Liabilities

Calculation Summary

Net Working Capital

$0.00

Current Ratio

0.00

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Understanding Working Capital

Working capital, also known as net working capital (NWC), represents the difference between a company's current assets and its current liabilities. It is a fundamental measure of a company's short-term liquidity, operational efficiency, and overall financial health.

The Working Capital Formula

The calculation is straightforward but provides deep insights:

Working Capital = Total Current Assets – Total Current Liabilities

What are Current Assets and Liabilities?

• Current Assets: Resources the company expects to convert to cash within one year (Cash, Inventory, Accounts Receivable).
• Current Liabilities: Debts or obligations due within one year (Accounts Payable, Wages, Short-term Loan payments).

Interpreting the Results

Positive Working Capital: This indicates that a company can pay off its short-term liabilities with its current assets. It suggests financial stability and the potential for growth and expansion.

Negative Working Capital: This occurs when current liabilities exceed current assets. It may indicate that a company is struggling to meet its short-term obligations and could be a warning sign of potential insolvency.

Current Ratio: This is the ratio of assets to liabilities (Assets / Liabilities). A ratio of 1.2 to 2.0 is generally considered healthy in most industries.

Real-World Example

Imagine a local retail store with the following figures:

• Cash: $20,000
• Inventory: $40,000
• Accounts Payable: $30,000
• Short-term Loans: $5,000

Calculation: Total Assets ($60,000) – Total Liabilities ($35,000) = $25,000 Net Working Capital. The Current Ratio would be 1.71, indicating a healthy financial position.

Frequently Asked Questions

Is more working capital always better?

Not necessarily. Extremely high working capital might suggest that a company has too much inventory or is not investing its excess cash efficiently.

How can I improve my working capital?

Strategies include improving inventory turnover, accelerating collections from customers (receivables), and negotiating better payment terms with suppliers (payables).

function calculateWorkingCapital() { // Get Asset values var cash = parseFloat(document.getElementById('cash').value) || 0; var receivables = parseFloat(document.getElementById('receivables').value) || 0; var inventory = parseFloat(document.getElementById('inventory').value) || 0; var otherAssets = parseFloat(document.getElementById('otherAssets').value) || 0; // Get Liability values var payables = parseFloat(document.getElementById('payables').value) || 0; var shortDebt = parseFloat(document.getElementById('shortDebt').value) || 0; var accrued = parseFloat(document.getElementById('accrued').value) || 0; var otherLiabilities = parseFloat(document.getElementById('otherLiabilities').value) || 0; // Totals var totalAssets = cash + receivables + inventory + otherAssets; var totalLiabilities = payables + shortDebt + accrued + otherLiabilities; // Calculations var workingCapital = totalAssets – totalLiabilities; var currentRatio = totalLiabilities > 0 ? (totalAssets / totalLiabilities) : 0; // Display Results document.getElementById('resultsArea').style.display = 'block'; document.getElementById('netWorkingCapitalDisplay').innerHTML = '$' + workingCapital.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('currentRatioDisplay').innerHTML = currentRatio.toFixed(2); // Formatting based on result var statusMsg = document.getElementById('statusMessage'); var wcDisplay = document.getElementById('netWorkingCapitalDisplay'); if (workingCapital 2.0) { statusMsg.innerHTML = "You have a strong liquidity position, though very high ratios may suggest underutilized assets."; } else if (currentRatio >= 1.2) { statusMsg.innerHTML = "Your working capital position is healthy and efficient."; } else { statusMsg.innerHTML = "Your working capital is positive but thin. Monitor your cash flow closely."; } } // Smooth scroll to result document.getElementById('resultsArea').scrollIntoView({ behavior: 'smooth', block: 'nearest' }); }