Cost Calculator AI
Business & StartupBalance Sheet

Working Capital Calculator

Evaluate short-term liquidity and solvency by calculating Net Working Capital (NWC), Current Ratio, and Quick Ratio (Acid-Test) from balance sheet items.

Current Liquid Assets (Within 12 Months)

Current Short-Term Liabilities (Due Within 12 Months)

Working Capital & Liquidity Ratios

Net Working Capital (NWC) = Current Assets - Current Liabilities; Current Ratio = Current Assets / Current Liabilities; Quick Ratio = (Cash + Accounts Receivable) / Current Liabilities
  • Current Assets: Liquid resources convertible to cash within 12 months (cash, receivables, inventory, short-term investments).
  • Current Liabilities: Short-term obligations due within 12 months (accounts payable, credit lines, accrued payroll and taxes).
  • Quick Ratio: Conservative test excluding inventory (which cannot always be liquidated quickly without steep discounts).

Step-by-Step Worked Example

Scenario: A company with $105,000 in current assets ($40k cash, $35k AR, $25k inventory, $5k other) and $60,000 in current liabilities

Calculation Steps:

  1. Net Working Capital (NWC) = $105,000 - $60,000 = $45,000
  2. Current Ratio = $105,000 / $60,000 = 1.75x
  3. Quick Ratio = ($40,000 + $35,000) / $60,000 = 1.25x
  4. Financial Health Status = Strong (Current Ratio > 1.5, Quick Ratio > 1.0)
Result: Net Working Capital is $45,000 with a Current Ratio of 1.75 and a Quick Ratio of 1.25, indicating strong short-term liquidity.

How to Use This Calculator

  1. 1Enter liquid cash balances, outstanding accounts receivable, and inventory values.
  2. 2Enter short-term accounts payable and accrued liabilities due within one year.

Assumptions & Limitations

  • Current assets and liabilities reflect current balance sheet valuations.
  • Accounts receivable are assumed collectible within standard 30 to 60 day terms.

Frequently Asked Questions

What is an ideal Current Ratio for a healthy business?

A Current Ratio between 1.5 and 2.0 is generally considered healthy. A ratio below 1.0 indicates working capital deficits and risk of insolvency, while a ratio above 3.0 may suggest idle cash not being invested.

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