What is working capital?

Working capital is current assets minus current liabilities. It indicates the short-term financial resources available after near-term obligations.

What is a current ratio?

The current ratio divides current assets by current liabilities. A ratio above 1 means current assets exceed current liabilities, though the appropriate level varies by industry.

Can working capital be negative?

Yes. Negative working capital means current liabilities exceed current assets and may signal liquidity pressure, although some fast-cash business models operate this way intentionally.

Does high working capital always mean better performance?

No. Excess inventory, slow collections or idle cash can inflate working capital. Review its components and operating cycle, not just the total.

Liquidity tool

Working capital calculator

Calculate net working capital and your current ratio to assess short-term operating liquidity. Break current assets into cash, receivables, inventory and other balances for a clearer result.

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Enter balance sheet amounts

Cash

Accounts receivable

Inventory

Other current assets

Total current liabilities

Current assets

$260,000

Working capital

$80,000

Current ratio

1.44×

Assets vs liabilities

Hover each bar to compare what you own short term with what you owe short term.

Current asset mix

Hover any slice to see how much of your liquidity sits in cash, receivables or inventory.

Current assets cover current liabilities, but the liquidity buffer is relatively narrow.

How to use it

How the working capital calculator works

Working capital compares resources expected to become cash within a year with obligations due within a year. The current ratio expresses the same relationship as a multiple.

Formula

Net working capital = Current assets − Current liabilities

1Add cash, receivables, inventory and other assets expected to convert within 12 months.
2Enter obligations due within 12 months, including payables and short-term debt.
3Review the result alongside collection speed, inventory quality and payment timing.

Worked example

If current assets total $260,000 and current liabilities are $180,000, working capital is $80,000 and the current ratio is 1.44×.

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Frequently asked questions

What is working capital?: Working capital is current assets minus current liabilities. It indicates the short-term financial resources available after near-term obligations.
What is a current ratio?: The current ratio divides current assets by current liabilities. A ratio above 1 means current assets exceed current liabilities, though the appropriate level varies by industry.
Can working capital be negative?: Yes. Negative working capital means current liabilities exceed current assets and may signal liquidity pressure, although some fast-cash business models operate this way intentionally.
Does high working capital always mean better performance?: No. Excess inventory, slow collections or idle cash can inflate working capital. Review its components and operating cycle, not just the total.

NanoFora provides AI-generated financial analysis for informational purposes and does not constitute regulated investment, tax or legal advice.