Working Capital Calculator

Check whether your business has enough short-term assets to cover the bills that fall due in the next 12 months.

Working capital formula

Net working capital = Current assets − Current liabilities Working capital ratio = Current assets ÷ Current liabilities Quick ratio = (Cash + Receivables) ÷ Current liabilities

Current assets are expected to turn into cash within 12 months: cash, receivables, inventory, prepaid expenses. Current liabilities are due within 12 months: payables, short-term loans, the current portion of long-term debt, statutory dues and salaries payable.

Example

Current assets of ₹20 lakh (cash ₹5L, receivables ₹8L, inventory ₹6L, other ₹1L) against current liabilities of ₹11.5 lakh give net working capital of ₹8.5 lakh and a working capital ratio of 1.74. Without inventory, the quick ratio is 1.13. On sales of ₹60 lakh, working capital is 14.2% of sales.

How to improve working capital

Collect receivables faster with prompt invoicing, early-payment discounts and follow-up.
Negotiate longer credit terms with suppliers, without damaging relationships.
Reduce slow-moving inventory.
Refinance short-term debt into long-term loans where appropriate.

Frequently asked questions

Is negative working capital always bad?

Not always. Supermarkets and some online businesses collect cash from customers before paying suppliers and run on negative working capital by design. For most small businesses, though, it signals a liquidity risk.

What is the difference between working capital and the current ratio?

Working capital is an absolute amount in rupees; the current (working capital) ratio expresses the same relationship as a ratio, which makes businesses of different sizes comparable.

Results are for planning and information only and are not accounting or financial advice. Check important figures with your accountant.