Operations
Working Capital Calculator
Calculate your company's working capital, current ratio, and cash conversion cycle to assess short-term financial health and operational efficiency.
How the Formula Works
Working Capital = Current Assets - Current Liabilities. The current ratio = Current Assets ÷ Current Liabilities (above 1.5 is healthy). Working capital as a % of revenue shows how efficiently you manage short-term capital — lower is better (typically 10-25% is normal). Negative working capital can be a sign of distress or, for some business models (like SaaS), a strength.
When to Use This Calculator
Monitor working capital quarterly to ensure your company can meet short-term obligations. It's critical during rapid growth (when receivables and inventory grow faster than payables) and during economic downturns (when collections slow). Bankers and lenders evaluate working capital when underwriting credit facilities.
Frequently Asked Questions
What is a good current ratio?
A current ratio between 1.5 and 2.5 is generally considered healthy — the company has enough current assets to cover current liabilities with a buffer. Below 1.0 means the company may struggle to pay short-term obligations. Above 3.0 may indicate the company is not efficiently deploying its assets.
Can negative working capital be good?
Yes, in certain business models. Companies like Amazon and many SaaS businesses operate with negative working capital because they collect from customers before paying suppliers. This means the business is effectively funded by its customers and suppliers, reducing the need for external capital. However, for most businesses, negative working capital signals financial stress.