Working Capital Calculator

{

Reviewed by: **David Chen, CFA, Corporate Finance Specialist**
Chartered Financial Analyst with 18 years of experience in corporate liquidity management and business valuation.

The **Working Capital Calculator** helps you evaluate a company’s short-term liquidity by measuring the difference between its current assets and current liabilities. Enter values for any three variables (Current Assets, Current Liabilities, Working Capital, or Current Ratio) to solve for the missing one.

Instructions: Enter values for any three of the four core parameters to solve for the missing one.

Liquidity Parameters

Current Assets ($CA$) – [Q]

Current Liabilities ($CL$) – [F]

Working Capital ($WC$) – [P]

Current Ratio ($CR$) – [V]

Working Capital Formulas

Working Capital and Current Ratio are linked by simple arithmetic and division:

Working Capital ($WC$):

$$WC = CA – CL$$

Current Ratio ($CR$):

$$CR = \frac{CA}{CL}$$ Formula Source: Investopedia

Variables Explained (Q, F, P, V – Parameters)

$CA$ (Current Assets, $Q$): Assets expected to be converted to cash within one year.
$CL$ (Current Liabilities, $F$): Debts due within one year.
$WC$ (Working Capital, $P$): The difference between $CA$ and $CL$.
$CR$ (Current Ratio, $V$): A simple ratio of $CA$ to $CL$.

Related Liquidity Analysis Calculators

Assess short-term solvency using these related tools:

What is Working Capital?

Working Capital (WC) is a financial metric that represents the difference between a company’s liquid short-term assets (Current Assets) and its short-term obligations (Current Liabilities). It is an immediate gauge of a company’s operational efficiency and short-term financial health. A positive working capital balance indicates that a company can cover its short-term liabilities with its short-term assets, suggesting good liquidity and ability to fund daily operations.

Conversely, negative working capital signals potential financial difficulty, suggesting the company may struggle to meet its immediate obligations. While WC is calculated as a dollar amount, the Current Ratio ($CA / CL$) offers a proportional view, which is often more useful for comparison across different company sizes.

How to Calculate Working Capital (Example)

Assume a company has Current Assets ($CA$) of \$150,000 and Current Liabilities ($CL$) of \$100,000. We solve for Working Capital ($WC$) and Current Ratio ($CR$):

Step 1: Calculate Working Capital
$$WC = CA – CL = \$150,000 – \$100,000 = \mathbf{\$50,000}$$
Step 2: Calculate Current Ratio
$$CR = CA / CL = \$150,000 / \$100,000 = \mathbf{1.5}$$

The company has **\$50,000** in Working Capital and a **1.5** Current Ratio, indicating healthy short-term liquidity.

Frequently Asked Questions (FAQ)

What is considered a “good” Working Capital balance?

Generally, a Current Ratio above 1.0 is considered acceptable, meaning working capital is positive. A ratio between 1.5 and 2.0 is often considered healthy, as it shows liquidity without excessive assets sitting idle.

Can a company have negative Working Capital?

Yes. Negative WC means current liabilities exceed current assets. While risky, some efficient, fast-moving companies (like grocery stores) can manage this due to rapid inventory turnover, but for most businesses, it indicates a high risk of default.

How does Working Capital differ from the Quick Ratio?

Working Capital is a dollar amount ($CA – CL$). The Quick Ratio ($CA – Inventory – Prepaids / CL$) is a stricter ratio that excludes inventory and prepaid expenses from current assets to test immediate liquidity.

Can I solve for Current Assets ($CA$) with this tool?

Yes. For example, if you know your desired Working Capital ($WC$) and your existing Current Liabilities ($CL$), the calculator can solve for the Current Assets ($CA$) you need to achieve your goal: $CA = WC + CL$.

}